Stock Trading

Happy New Year everyone! I bought myself a new book to digest over the Christmas and New Year holidays. Unfortunately, I haven't got down to flipping the front page until the very last day, which is today. Here is an interesting excerpt:

There has been much controversy among market experts as to the differences between trading and investing. Investors have been characterized as stable, serious, financially well-off types who are focused on implementing the capitalist ideal by using their money to make money over the long term. By long term, I mean a period of more than six months. Indeed, in today's changing economic environment, the definition of long term is very different than it was prior to the late 1980s. In those days inverstors held stocks for a number of years in order to achieve slow and steady gains. There was nothing wrong with that strategy and there is still nothing wrong with it, if you have time and considerable patience.

For those who are less willing to wait from two to seven years for results, there are many short-term opportunities in today's markets. The short-term end of the market does not necessarily mean "day-trading" (i.e., trading within the time frame of the day and not keeping stocks overnight). These opportunities were created by increased stock market volatility that began in the 1990s. By "volatility", I mean relatively large price movements in stocks during the course of the trading day....

... From 2000 through early 2004, stocks became less volatile and with the decrease in volatility, day trading opportunities diminished. On the other hand, short-term trading opportunities continued to be plentiful. By short term I mean from two to about ten day's duration. As brokerage house commissions for online trading continued to decline, the cost of trading decreased, thereby making short-term as well as day trading more viable... While I believe that day-trading can be profitable, it is an arduous venture that is both time-consuming, labor-intensive, and often not worth the time or trouble unless you are totally dedicated and willing to trade a large number of shares each time.