Hi guys, So I'm new to trading/investing (I know these two are quite different things but here's my thought process). Ultimately, I started a month ago wanting to invest in the stock market whilst everything has/is crashing. I'm managing to save $2000 a month to put into my trading account on eToro. Ive quickly realised how risky trading can be and so I'm trying to respect that by implementing a plan to be able to practice trading at a low risk. Overall, I want to view this as more of an investment - it seems the risk is lower that way but I also want to learn how to day trade and perhaps maximize my profits a little more than just leaving it in an account. So, I've learned that blue-chip stocks are the most reliable - and especially given the current situation with Covid I've tried to identify a list of companies that I believe will survive and bounce back after this recession. Microsoft, Apple, Coca-Cola etc. My question is, is scalping without a stop loss a valid strategy on blue-chip stocks in the current climate? Ie, if I invest in McDonald's and I was wrong on my judgement of the screens is it okay to just leave it in the red on the assumption it will return in future? (PS, I'm only doing this as a buy) Is this a viable, low-risk trading strategy that suits the market at this time? I've been doing it the last 2 weeks with a fairly good success but I'm unsure as to whether I could be earning more if I just leave it alone. I apologise for what is most likely a newbie question. I'm trying to learn as much as I possibly can about investing at the moment. Many thanks, James
might not be a good idea to throw out your money into the market. You are just bbbbuyingg the stock to hold them or what? I don't understand your strategy.
Your terminology of scalping and long term buy and hold are not the same. If you're holding for the long term then your strategy is buying defensive recession proof stocks - certain sectors will be like this more than others. You could also buy ETFs instead of certain companies
how are you defining the word "scalping" apart from what you plan to do, but as it is used in trading? These may be two different thingasaurus's
If I understand you correctly: You are taking small profits but exposing yourself to potentially huge losses, resulting in a high win rate. Small reward high risk. Please don't, this may eventually steamroll you and it's very hard to judge if the strategy actually has positive expectancy. Of course, we do know that being long the stock market usually works in the long run, but transaction costs can eat into that edge if you're jumping in and out of stocks randomly.
OP, some good suggestions above with respect to long buy & hold of growth ETF's that hopefully have a bag of 10's to 100's of quality companies. Depending on the $ investment, number of shares, any rotation that you'd be doing, always factor in the commissions & if you're doing margin or leverage on the plays,with all thats going on today you could have lost your lot. FWIW,take a look at the long performance of the major ETF indices ... SPY, QQQ, DIA. Or if you are looking for a major player stock to add to the ones that you mentioned,take a look at BRK-B, WMT or a financial play such as MA, V, C Long term horizon minimum 10 years what returns or growth are you looking for? on all the above if you are considering short term scalping, whether that be dividends, growth etc, you could look at options on those positions.
the strategy is viable, I do it myself, but not for now as its unclear if we have really reached the bottom. the risk is you sit on a great poition you no longer want to hold (sudden new credits with high interest rates in the books for example) and you cant leave the position without having a huge loss. the strategy is called martingale scalping btw.
Don't try to trade or time the market - doing so profitably, in a consistent way, with good risk-adjusted metrics etc takes years of training and experience, and even then 95%+ will underperform a simple passive portfolio. Take that $2k a month and put it in an all-world stock ETF or mutual fund. If you want to get slightly fancier then read up on long-term passive portfolio investing and build your own diversified portfolio (don't pick individual stocks, buy entire asset classes).
I think that understanding the different trading styles and their time horizons is a good place to start. Here are some common categories: STYLE: TIME HORIZON Investing: Quarterly, yearly, or generational. Speculating: Weekly to Yearly. Trading the move on some event. Swing Trading: Multi-day, weekly, quarterly Day Trading: In at 10am, out by 3pm. Scalping: Seconds. Trading quick price movements with one click. Low-Latency (Algo/HFT): Less than 1 second Ultra Low-Latency (Algo/HFT): Less than 1 millisecond So, pick a trading style and time horizon. Be clear about expected price movements therein, profit expectations, and your entry/exit points.
Low risk high/reward cannot exist. If it existed, everyone would do it. If everyone does it, it does not work.