Hello Trader! Today we are going to compare two very different ways of investing in the stock market.
Both day-trading and holding are investment strategies that usually go hand in hand. It is very rare the trader who does not hold some assets, such as stocks or cryptocurrencies, for several years. So today we are going to explain what both strategies are and how you can apply them to your portfolio.
Trading is the process of buying and selling financial assets frequently, and often at regular intervals, while holding is simply holding the assets you purchase until their prices increase over the years.
The question now is: Which is more profitable?
To make the answer a little more understandable, we will explain the advantages and disadvantages of each:
A) Control: In trading, you can establish an investment strategy, with a clear entry and exit, and on the same day. This allows you to have more control over the decisions you make with your investment.
B) You make more money (if you do well): This is because you are buying and selling assets with a relatively large investment, in a short period of time. Whereas holding you have to wait years to get a 3% return, for example, day-trading can give you a 1% return in a couple of hours.
C) More ability to predict the market: When trading you have tools to show you how the market works. This is very useful because you are forced to understand it, and as I said before, you are forced to understand the market.
The big disadvantage of trading
By trading, you run the risk that your trades are poorly planned and that your trade will end in a loss.
Advantages of holding
Generally, most people think that trading is more profitable. However, it should be noted that trading has a higher commission and a higher probability of loss.
While trading makes money immediately, holding requires a longer period of time to generate considerable profits.
In addition, hold trading does not have the risks that trading has. Holding does not have commissions or the same probability of loss. However, holding does have a slight chance of making a loss due to inflation.
Disadvantages of holding
Holding has the disadvantage of not giving you the experience of buying and selling assets, so you will not be able to develop a diversified portfolio. This means that you are exposing yourself to greater risk, as you will not have the tools to manage risk, nor the tools to choose the right assets.
Which is more profitable?
Most traders believe that you get a higher return by trading, although they take a much higher risk than by holding.
For this reason, we recommend investing in both styles. There are assets that are more favourable to invest in years ahead, and others that can give you good profits in a matter of hours (if you trade correctly).
Finally, we would like to remind you that you can continue learning Trading in the best way with the Masterclasses from Canal Trader, with 40 financial training sessions full of formative and human quality, which will help you to order and structure the market with head.
We hope to have helped you once again, may the market be with you!