Is it better to Day Trade or Invest for the long term?
Hey I’m Ben from Motivation2Invest our mission is to help motivate you to invest for your financial freedom, whether that means escaping the 9-5 drudgery or just improving your life.
I’m here to help you by providing you with valuable investing tips & strategies.
In this video I’m going to talk about the differences between Day Trading such as Forex & long term investing.
I’m also going to compare & contrast Which is a better strategy to grow your wealth.
Lets Dive in 😊
What is Day Trading?
Day Traders buy & sell securities in short time windows such as one day or one week.
They usually leverage a large amount of capital via a broker to take advantage of very small price fluctuations.
Forex is a common market where day traders operate.
For example, A day trader can take advantage of a very small price fluctuation between British pounds & US Dollars.
For instance, If the GBP/USD exchange rate is 1.313
And a trader invests £1000 at this rate.
Then throughout the day it’s price fluctuates to 1.314
Then if the trader sold he would make just $1 profit.
However, Traders use risky “Leverage” via a broker service to enhance the trade.
For example, using a 1:100 leverage ratio. The trader would be able to Purchase £100,000 worth of currency on that trade.
Then when the rate moves up by a very small amount to 1.3140. Then the trader would make $100!
However, the Use of leverage not only increases your reward but also magnifies your RISK!!!
The can also fees for using the broker services.
How does a trader know if the price will increase?
Traders attempt to predict if the price will increase or decrease by using software & mathematical graphs which show what’s called a divergence.
Can you Make money with Day Trading?
Yes but with large risk and a massive time commitment to learn the skills & become a “forex pro”.
I know a few extremely skilled day traders, with expensive software who make $1000 a day spending approximately 5 hours trading each day.
Now this may sound great. However, Trading is for most people is usually not a successful pursuit, If you subscribe to the theory that time is money.
Many people I know who have tried day trading, find themselves up by $100 one day, down by $80 the next day and then only end up making a $50 profit over a few days & many rigorous hours of trading.
If you compare this to a normal job then you would likely earn more & not have to risk any capital.
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Usually the training to learn how to be a successful Day trader is also very expensive, with many online courses showcasing a glamourous lifestyle which has been paid for by their trading. (Lambo images)
However, as the old saying goes “If you can’t do, teach” and I suspect many of the people running these day trading courses have made millions from their academies as opposed to the actual trading.
What about Long term Investing?
Long term investing is not as fun or exciting as day trading but its less stress & has been historically proven to work! With minimal time commitment required it’s often extremely passive with no Risky leverage required.
As Billionaire investor Warren Buffet says “Leverage is where you go to die”
Whereas, if you Invest into a passive index fund such as the Vanguard S&P 500, this is likely to give you an average return of 8-10% per year.
This includes some years when your investment may grow by as much as 40% and others where it may decrease by 10%.
Index Investing is a fantastic way to make your money grow passively. As your pot grows through the magic of compound investing you can also receive dividend payments which can provide you with passive income.
For even greater rewards but slightly more risk you can also invest into individual company stocks.
For example: A £1,000 investment in 2009 would be worth more than £13,300 as of Dec 2019, this is an incredible return of around 1,232%,
Which are the best stocks to invest in?
For more on how I used Warren buffets method to evaluate which are the best small businesses to invest in. Check out my previously video on the link below.
Despite me being a long term investor I still made a profit of £1000 with 7 days. During the latest stock market crash.
Also be sure to check out revolutionary the FREE Trading apps such as Free Trade & Trading 212.
Using the links below you will get a Free share worth up to £100 when you sign up & deposit!
I would love to know your thoughts on Day Trading & if you have tried it! So comment below.
Also smash that like button if you enjoyed this video & definitely subscribe!
See you next time! 😊
