Trade Ideas Blog

Investing Smart: Don’t Trade Away Your Freedom to Profit

Feb 21, 2010

Investing and trading are not really all that different. The question is of course the time frame. Day trading has often been portrayed in a negative fashion but in reality the mechanics of investing and day trading are the same. It is all about the time frame, but even that is a bit misleading, the truth is that it is more about control.

When one says, “I am in it for the long term”, it is simply a phrase that says I am letting go of risk controls. That may sound harsh but it is true. If an investment starts to perform poorly, how long is the long term? When Ford Motor Company went from $40 per share to $1 at what point do the long term investors say enough? This is at the heart of failure in stock trading as well as investing in the markets. When you give up control, you set yourself up for failure. The big brokerages want this believe it or not. They want you to give them your money and they would prefer if you completely let them control it from start to finish.
Pricing Conditions Behavior
Ever wonder how brokers like Schwab and Fidelity still charge $8.99 per trade and try to sell it as cheap? Think about it. You just bought 100 shares of a $10 dollar stock. You just paid 9 cents a share!!! If you had to repeat the process 10 times during the day, you will have paid the brokerage $90 dollars that day. This pricing basically says, please don’t trade often. When it is price prohibitive to trade often people feel like they have an excuse for why they give up the control. Do not let yourself fall into this trap. There are less expensive alternatives that are just as safe, that will give you the kind of pricing that at least makes it possible to get out of danger. Imagine a car that only turned right!
Does that mean you have to trade stocks often? Not necessarily, you just need to have the ability to do so without punishment. We are fortunate today because many market alerts and filters things that are important to long term investors, like P/E ratios, sales, and debt can be incorporated into stock scanning software where the results automatically make sure you are only looking at candidates that meet the minimum level of performance in a long term investing or trading strategy.
The Trade Ideas stock scanner incorporates fundamental data in its stock scanner results. One approach to using building useful scans consists of finding stocks are not only performing well from a technical analysis and price action point of view but exhibit: A) strong or B) weak fundamentals depending on which way you are looking to trade the stock. See all the fundamental indicators that are available in the Trade Ideas stock scanner.
When looking at strength or weakness don’t settle for being one dimensional. Take advantage of all that the Trade Ideas stock scanner has to offer, including a wide breadth of fundamental data to help you zero in on winning trades!