How many times have you heard someone say the trend is up or down? I'm sure you have heard that a lot if you have been involved in the markets for any considerable amount of time. There are many trends out there in the stock market. One way to identify a trend is by viewing the particular time-frame which you might be trading. For example, there could be a down trend on the hourly (60 minute) chart, yet the weekly chart might be in an uptrend. That is why it is important to understand the time period that you are trading specifically. This will also help you determine what best suits your trading style.
There are many different stock market participants each and every day. There are day traders and scalpers, these are the people who trade a particular equity for minutes to hours. These traders will usually close out their positions quickly and before the closing bell. They take their risk during the trading session and have no exposure to equities overnight. This is a very aggressive form of trading, but it can be very profitable and rewarding if done correctly.
Next, are the swing traders. These are people that hold trades for a couple of days to a couple of weeks. This form of trading has become increasingly popular over the years as many traders look to capture the near term bounces on a daily chart. Swing traders are usually looking for larger moves and not the small bites out of the stock market, like a scalp or day trader would. Profitable swing traders will take a position and know their exact targets before entering the trade, therefore, they do not have to monitor every move in the stock.
Then there is the investor, these individuals will look at larger time-frames and try to capture bigger moves in the market. Most investors will view the weekly and monthly charts. These investors are not too concerned with the everyday price action on the daily charts as they are viewing the larger time frames. Over the past decade, it is clear that those who bought the market and held that position for that duration took multiple rides up and down while not capturing the potential gains most swing traders and day traders experienced.
It is very important for an individual trader to know what time-frame best suits him or her. There are many traders that just cannot handle the fast action of a day trader, and that is fine. There are people who prefer to trade the slower action off the daily, weekly, and monthly charts. Also, you might have a day job and cannot be at the computer to day trade, therefore, swing trading is best suited for you.
The type of trader you are reflects the type of personality and lifestyle that you have. There is really nothing wrong with any of the trader categories, it is individual preference. I have met many good swing traders and investors of whom became excellent day traders as they evolved and as their lives allowed it. Many of these people simply wanted to trade the first couple of hours of the day and not have any exposure to the overnight risk. Or they wanted to make enough money in the first hour of day trading and enjoy the rest of their day; that is what day trading can afford you.
Regardless of the type of trader that you are it is important to have a sound method under your belt. Here at InTheMoneyStocks we look to buy major support and sell major resistance. Now there is quite a bit that goes into finding major support and resistance levels, so there is definitely work involved. Fortunately, once you learn the techniques you can trade any time-frame and capitalize in the markets. The great thing about have a sound methodology is that if you are wrong you will generally be wrong in a small way. This is why it is so important to understand chart patterns, price action, and time. Stock charts are the footprints of human emotion and money flow. Now you can start to evaluate yourself and find out what type of trader you want to be.