The question “how to make money in stocks” gets asked at least once in a day, be it on google or on any stock trading class. Regardless, whenever this question is asked, the terms “swing trading” and “long term investing” come up. But what are they?
Understanding these terms is important, as they are strategies that influence how well your investments perform in the stock market, and how much money you may make. In this guide, we will explain what each of these techniques means, what they are good and bad for, and what makes them different from each other in small ways.
This technique means taking advantage of short- or mid-term changes in the price of stocks or commodities. Swing traders mostly use technical analysis to find good trades and decide when to enter and exit. Swing trades last for a few days or, in some situations, a few weeks, depending on how patient the trader is. People who want to make extra money often use this method.
What are the good and bad things about swing trading? This way of investing doesn’t take up a lot of time. Also, you can learn swing trading quite rapidly because it only uses technical analysis. But what makes swing trading popular with investors? It can be profitable, with some traders aiming for returns of more than 50% in a year.
That said, the swing trading method does have certain downsides. You are at risk of price swings overnight and on the weekends because you don’t close your position every day like a day trader would. Also, the money you make from each trade is usually less than the money you make from long-term investing.
Long-term investors don’t pay any attention to what people say every day, week, or month. They are interested in things that go up in value over time. People who want to save for retirement usually invest this way. That being stated, you can close your positions on a long-term investment once you are happy with the profit. This can happen as soon as a year after you open your position.
You need to be very patient and have faith in your investment if you want to invest for the long run. You will have to ride out price drops in stocks or commodities, knowing that the long game will pay off.
People who like this technique do so because it takes as little time as possible to invest in the stock market. You’re not constantly reviewing daily charts or setting stop-loss or take-profit orders. You can look at your positions every few weeks, but that’s all. People also think this way of investing is less risky because you put your money into good, profitable things. But not many investors have the patience to just invest for the long term. In certain circumstances, you won’t be able to get your money for years, so you can’t use this as a way to make extra money.
Swing Trading vs Long Term Investing: Which Approach Best Suits You?
When you ask how to make money in stocks, you also wonder which of the two approaches suits you best.
| Approach | When It Might Suit You |
| Swing Trading | Choose this if you’re comfortable spending more time analysing charts and tracking market indicators. It can work well if you’re looking to generate more frequent profits that could contribute to regular income. |
| Long-Term Investing | This may suit you if your goal is building wealth over time, such as preparing for retirement. It works best when you have extra capital that you don’t need in the near future and are comfortable letting your investments grow over several years. |
| Why Not Both? | Instead of choosing one over the other, you can combine both strategies. Long-term investments can help build future wealth, while swing trading may provide opportunities for shorter-term gains, helping you diversify your overall strategy. |
Proper stock analysis is needed regardless of what is to be done, even when you decide on either swing trading or long-term investing. However, if you truly want to know how to make money in stocks, the best way to do so is to have a balanced approach and draft your portfolio in such a way that you balance both.
No matter whether you prefer swing trading or day trading, or keeping stocks for decades, always make sure your strategy fits your goals, lifestyle, and risk tolerance. In fact, both ways can work together: short-term trading for quick profits and long-term investing for creating wealth over time.
When markets get shaky, keep in mind that patience makes money and strategy makes you feel good. Together, they make success.
