There are two ways that people invest in the market: there are investors and day traders (I share how I make money day trading at TheDayTradingAcademy.com). Investors are in the market for the long haul. They place their retirement and savings into the market with a simple premise that the market will go up over time. Day Traders are in the market a fraction of the time. They take advantage of the day to day fluctuations (sometimes only minute to minute changes).
Investors use fundamental analysis to value what a company is worth. What is fundamental analysis exactly? It when you gauge the value of a company (and its stock price) by how the company handles itself. This has to do greatly with quality of products, management, and how the company handles itself in the market as a whole. A great example is Apple, they make great products and have an excellent product line with the Iphone, Ipad, and Macs.
In addition, they have great management which makes the company extraordinarily valuable, hence the $200 plus stock price (and climbing). Investors also look at quality and demand for a company’s products (who doesn’t want an Iphone?). Another excellent example is Google.
Day Traders don’t look at a company’s fundamentals at all. They focus solely on stock price and technical analysis. Technical analysis is using a precise set of indicators that allow you to efficiently decipher patterns in the market. They also allow you to gauge momentum, strength, and potential reversals. An active position for a day trader will last a few minutes to a few hours, very rarely will a position be held overnight.
Day Traders analyze individual company stocks, currencies, and even indexes. Many call it gambling, but if you look at specific patterns and movements that occur continuously with high probability, it’s simply having the odds in your favor.
Day Trading has a tale of two extremes: extremely lucrative and deadly. If you are disciplined and stick to a plan that works the potential is endless. Be on the opposite end of that spectrum and you will feel EXACTLY like the picture above. If you want more information about getting started read my 2 previous posts on why you should get started day trading:
- Ever thought of owning your own business? Working for yourself? Consider Day trading
- Owning your own business & working for yourself – Get started day trading part 2
We also did a great video talking about day trading which you can view here.