January 2012
Intermediate to advanced
624 pages
17h 49m
English
Chapter 24
Scalping, Swinging, Trading, and Investing
An investor is someone who buys stocks based on fundamentals and plans to hold the stocks for six months to many years, allowing time for the beneficial fundamentals to be reflected in the price of the stock. Investors will often add to their positions if the stock goes against them, since their belief is that the stock is a value at the current price. A trader is someone who trades off daily charts and short-term fundamental events like earnings reports and product announcements with the intention of capturing a quick move, lasting from one to several days. Traders will take partial profits at the first pause and then move their stops to breakeven on the balance; they are not willing to have a profit turn into a loss. Traders are sometimes referred to as scalpers, but that term more commonly is used to refer to a type of day trader. Incidentally, it is important to keep to your time frame. A common cause of losses is putting on a trade, watching it become a loser, not exiting at your planned stop, and instead convincing yourself that it is fine to convert the trade into an investment. If you put it on for a trade, exit it as a trade and take the loss. Otherwise, you will invariably hold it far too long, and the loss will become many times larger than your original worst-case loss. On top of that, it will be a constant distraction and interfere with your ability to place and manage other trades.
In the eyes of a trader or investor ...
