Overtrading Can Be Hazardous To Your Wealth

For Most People Jumping In And Out Of The Market Hurts Performance

Many inexperienced traders and investors often think they have to dart in and out of the market to be successful. Nothing could be further from the truth. While there are some traders who make money "day trading", that is the practice of buying and selling securities in the same day for profit, most retail traders and investors will be much better off either position trading or swing trading.

Position trading is purchasing a stock or other security and holding on to it for a period of time. The time period, while never the same for any two trades, usually lasts anywhere from a couple of days to a couple of months, or even years. This practice has the trader purchasing a quality company at a reasonable price and holding that stock through an uptrend in price.

Swing trading tends to fall somewhere between day trading and position trading. Often you will follow similar rules for making a trade as when position trading, however, you will often buy just after a stock has made a pullback and will sell after a few days, hopefully capturing a small but decent profit with limited risk.

Neither of these types of actions require you to be in the market at all times, trading just to be trading. Both actions require patience to wait for the stock to set up properly so you can minimize risk and maximize gain when you purchase.

In other words, jumping in and out of a stock too often generally leads you to both buy and sell at the wrong time which only hurts your performance.