What is Stock Trading?

What is stock trading, how is it different than stock investing, and what part of stock trading is this blog focused on. A stock trader has the same objective as a stock investor: to profit from buying and selling stocks, or stock-related derivatives like stock options. I include equity mutual funds, ETFs and stock indexes in the stock category. Stock investors generally plan to hold their positions many months or years. They purchase stocks hoping to profit from dividends and capital appreciation. They generally emphasize fundamental analysis much more than technical analysis. Selecting the right stocks are very important to them since they plan to hold them for a long time.

Stock traders plan to hold their positions for much a shorter time, from minutes to a few months. Timing of opening and closing positions is generally just as important as what stocks are selected. Most stock traders use technical indicators to guide their timing, or events such as earnings announcements and stock splits. One way stock traders are different is in how long the trader plans to hold their positions: their time horizon.

Day Trading

Day traders usually do not hold positions overnight. They open and close positions within the same day. This demands paying close attention and management of their positions, so usually day trading is a full-time profession. Day trading is often seen as the most risky trading style, and emotional day traders can lose their money quickly. The information on this site is not targeted to day traders. We focus on holding positions overnight. However, day trading resources are available in our directory here.

Swing Trading

Swing trading holds positions from a few days to a few weeks. A swing trader generally spends a few hours a day finding opportunities and managing positions. Swing trading can be done by beginner traders all the way to advanced. Some examples from my past swing trading is playing earnings announcements and stock splits. Both are event-based strategies to take advantage of short term price movements. I have also used technical analysis (indicators, chart patterns) to determine my entry and exit from positions. I did this for years while I had a demanding full-time job. The trades done by the Stock Trading Systems featured on this site are usually swing trades.

Position Trading

Position traders hold positions from a week to a few months and is probably the most common trading approach. Trend following is emphasized in position trading. “The trend is your friend.” Choosing  fundamentally sound stocks is also more important than it is to day and swing traders. For example, buying undervalued beaten down stocks is a position trading strategy; one we use in the Stock Trading Systems featured on this site. Position trading systems are usually simpler than day and swing trading systems, and take about 30 minutes a day to implement. My first trading experiences was as a position trader, trading stocks and mutual funds. I relied mostly on fundamental analysis and long to intermediate term trends. The trades done by the Stock Trading Systems featured on this site are sometimes position trades, especially those from the trend following Stock Market Timing system.

Swing and position trading is ideal for people who trade part time. Even though I make my living trading and investing, I don’t spend much time doing it. I have too many other interests. That is why my trading focuses on swing and position trading. This site is focused on people like me, who don’t want to spend eight hours a day watching the market. We make it even easier by offering trading systems for part-time traders, so you do very little to trade stocks.


I hope this post has answered some of your questions about stock trading. Please give me your comments and questions by leaving a comment.

Tags: beginner traders, FAQ, stock selection, stock trading system

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