Sprint, Marathon, Relay: What's Your Race?
In a post last week I mentioned that I'll be conducting a survey during the month of June to help my readers better understand their trading style! If you would like to take part in the survey, you can sign up here:
In today's post I'm going to take a closer look at the Sprinter, the Marathoner, and the Relay Racer. Keep in mind that each type of runner has a different goal in mind and, thus, they utilize different training, different equipment, and employ a different mind set. This is no different in the trading counterparts!
In the investing world, I equate the sprinter with a day trader. Let's have a look at the most important elements of day trading.
I think of marathoners as the long term investors,
In today's post I'm going to take a closer look at the Sprinter, the Marathoner, and the Relay Racer. Keep in mind that each type of runner has a different goal in mind and, thus, they utilize different training, different equipment, and employ a different mind set. This is no different in the trading counterparts!
The Sprint
In the investing world, I equate the sprinter with a day trader. Let's have a look at the most important elements of day trading.
- Open and closes position same day
- Uses candlestick charts
- Not a research intensive type of investing - more technical in nature
- Requires intuition and the ability to act impulsively
- Requires a high level of availability during prime trading hours
- Requires you to be comfortable with making decisions in a fast paced environment
- $25K minimum portfolio (FCC required)
- 95% of Day Traders lose their portfolio within 5 years
- Broker houses don’t assume risk on your behalf
The Marathon
- Holds a position for 6 months or longer
- Focuses on fundamentals - uses tools like Value Line, Barron’s and WSJ
- Very research intensive type of investing - less reliant on technical analysis
- Data centric, patience is a virtue
- Doesn’t require daily activity during trading hours
- Shouldn’t expect instant gratification
- Anyone can trade this way, with a portfolio of any size
- 75% of stocks mimic market trends so long term portfolios rarely lose value unless a bear market persists for a long period of time. Portfolio fluctuations are usually minor and can be absorbed over the length of the position
- Mitigating risk requires dollar cost averaging in a bear market
The Relay
The closest thing to a relayer is the growth stock investor!
- Profit/Loss driven, length of time in the position is less important. Holds a position until a specific profit percentage has been achieved
- Focuses on momentum - uses tools like IBD, Market Smith
- Somewhat research intensive type of investing - somewhat reliant on technical
- Data driven - relies heavily on institutional behavior - you must know how to determine that
- Requires activity outside of trading hours - not during
- Does not expect an instant return. Is willing to wait up to 8 weeks for their positions to mature.
- 401(k), IRA, or cash accounts can be used for trading these stocks.
- IBD® 50 stocks have returned 776% growth since 2003. The S&P 500 has returned 204% over the same time period.
- Growth stocks carry a risk of rolling over precipitously. Requires diligent use of stops.
Wrapping Up
Next week we'll have examples of famous traders that match up with each persona! Just a reminder, the survey results will go out at the end of the month and everyone that participates will receive a free copy of my watch list!
Happy Trading!
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