What Are the Different Types of Stock Trading?

Stock trading is both an exciting and nerve-wracking experience. When you’re first getting started, it can be difficult to balance the thrill of potentially betting your money on buying penny stocks, with the risks of losing your hard-earned cash on a bad decision. If you’re starting to get involved with stock investing for the first time, remember that the key to success is focusing on long-term results. If you get too caught up in the moment, then you’re more likely to make a choice based on emotion, which is often bad news for your trading strategy.

Before you start getting carried away with things like trade simulators or enrolling in a well-known stock trading course, you need to understand that there are many different types of stock trader. Here, we’re going to look at the basics of stock trading, and the different kinds that you can get involved with.

The Types of Stock Trading You Can Choose From

The word “stock trader” is typically used to refer to someone who purchases and then sells stocks to make the most of the fluctuations in price that can happen during the day. Most of the time, these stock traders are day-traders, investing in shares during short-term bets that allow them to make money as quickly and consistently as possible. If you decide to become a stock trader, then there are two camps you can fall into, either the camp of the active stock trader or the passive stock investor. An active trader is someone who traders at least 10 or more stocks per month. When you’re an active trader, you focus on building a strategy that allows you to take advantage of short-term changes in the market.

Day trading is the most common form of active trading. A day trader is someone who holds onto a stock for a very short amount of time- typically closing positions by the time they’ve finished trading for the day. The chances are that as a day trader, you won’t spend much time finding out about the inner workings of a business, because you aim to make money as quickly as possible.

What is Passive Stock Trading?

If you’re not the kind of person who wants to quit their day job and focus on stock trading full time, then a life as an active trader might not be right for you. Passive trading or investing is the alternative to day and active trading. As a passive trader, you get involved with stocks and shares in the long-term, with the intent of building up money through changes and dividends over the years.

The good thing about passive stock trading is that you don’t need to spend as much time on your financial portfolio. You won’t rely as much on technical evaluations of stock to make your decisions, and will instead look at investments based on what you know about the strength of a certain business or industry. The idea is that with passive trading, you’re rewarded with your investments over the years, rather than in a matter of hours or days.