January 28, 2013
5 Reasons Why Trend Trading Is Much Better Than Buy-and-Hold Investing
Today there are many preferred perspectives taken as far as investing techniques are concerned. Most individuals are conversant with the standard system of buying a stock and letting it grow before selling it a few years down the road. But before you begin investing that way, there is a plan that's growing gradually in appreciation. This is the business of trading based on trends often referred to as trend trading. Here are 5 reasons why trend trading is better than buy-and-hold investing.
Simpler to Learn and Apply the Concept
A backer who is operating from the standpoint of trends has a lot to digest in the sense of trade research and the like. There has to be an appreciation of the market generally and its trends together with those of technical signals. However the biggest difference between a trend investor and a buy-and-hold is that the things that are learned here can be applied to stocks generally. Even without prior knowledge on the stock in question.
Potential for Higher Profits
How a buy-and-hold profit works is that an investor buys a stock that is currently at a cheaper price. If the financier has purchased a good stock, the value of the stock rises and the investor makes a profit out of the difference between the stock’s current price and the price it was acquired at. This is all well and good, but most people notice that stocks move up and down even if the overall trend is for either. Trend traders exploit this by selling and purchasing in the opinion of the highs and lows. So they can profit from the highs and lows as wells as the overall price of the stock.
The buy and hold philosophy can be used for any time period in theory, nonetheless it is normally more closely fitted to investors who are investing long or intermediate term. With trend trading, it is possible to profit whether you are trading for the day or the week or the year. It can be applied to a great range of situations and if a trader wants to rest from the market, it is actually possible to do so with your profits already guaranteed[**].
Very Little Prediction
The business of trend trading revolves around watching objective technical signals and using that information in making decisions. In contrast to the buy and hold philosophy this may be accomplished with little research on particular stocks. By studying the trend, a trend trader can make judgements concerning their stocks and it is awfully hard to enter transactions on a bet this way.
Trend Trading is About the Investor
Trend trading depends more about the investor and the quantity of talent that individual has. When trading on a buy-and-hold just about the only possible way to profit is by hoping the stock will go up. With a trend trader it is not so much about the stock going up. It is about how well the investor can see whether a trend is changing. Once the stock suggests that the trend is changing, the market trend financier will leave the transaction and find another.
The buy-and-hold methodology of investing has played a very important role in the development of the exchange we see today. Having several stocks that are doing well and hanging on to them could easily end money concerns. However in the world as it is now, such an investment plan is getting more and more impractical. You have read 5 reasons that explain why trend trading is better than buy-and-hold investing. Before getting involved in the stock market give major consideration to trend trading.
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Filed under Stock Market by Koly Brient