Day trading VS long term investment: profits in your pocket right now or later?

 

Traders are a naturally impatient breed of people.

We want more for our money, and we want it quickly.

It’s this drive that often gets us into trouble, chasing fast profits or shifting from strategy to strategy, when a more long-term, passive investment style would make more money.

But that’s not to say that money isn’t on the table for those who want to be more active and get faster results. It’s just important to understand the difference in these approaches.

Long term vs day trading

Longer term trading can bring more stable returns. The trade-off is that the percentage gains can be more modest. Long-term traders might see returns in excess of 25% in a year … medium term could get over 50% … while day traders will be aiming at 100%+

By compounding the more modest returns of long-term investment, these strategies are a powerful tool in wealth-building.

Plus, they take less effort, less know-how, and less stress.

By contrast, shorter term trading strategies like day trading will often boast that you can double your money in just a few months. It’s perfectly possible to achieve this kind of success, but if you’re following this route, you need to be aware that, while you might make 100% in the next 6 weeks … you could potentially lose as much in the month after …

Higher rewards will naturally go hand-in-hand with higher risk

I will often try to steer traders away from day trading, because it’s tough to maintain consistency and to deal with the inevitable ups and downs.

If you see that small print at the bottom of your broker’s website about 83.2% of retail investors losing money … you can bet that most of them are day trading.

But what about that 16.8% who aren’t losing?

What do they know that the rest don’t?

Sure, there’ll be a degree of luck to it – just as there’s a degree of bad luck to the losers. But success in short-term trading comes from consistency, managing drawdowns, and keeping risk levels low enough that you can stomach the ups and downs. Of course – you need a winning strategy too!

All the skills that are important when managing positions over days or weeks become vital in day trading.

I can’t tell you which style of trading is best for you. Personally, I trade weekly charts, holding positions for months at a time, daily charts, holding positions for several days, even weeks, and I day trade on 5, 10 and 15 minute charts.

Perhaps it’s greedy, or fickle, for me to try to do it all … but in each field of trading I aim to be very selective, only taking the best trade opportunities. And I know the limitations of my personality – I’d get too restless if I was only doing long-term trading … and I’d stress about the ups and downs if I was solely focused on day trading.

Whichever styles of trading you opt for, please be aware of its limitations as well as its strengths. It’s only when we’re prepared for the downsides that we can stay in the game long enough to reap rewards. Whether we’re holding positions short-term or long-term – we’re always aiming for long-term success.

 

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