Short-term trading or long-term investing
Everyone who enters the stock market has similar desires and different opportunities, so their methods of earning money should also differ.
Some begin their trading journey with just a hundred dollars, while others want to grow their fortune to several million.
Depending on the size of your initial capital, you should choose your primary earning strategy, as otherwise the risks are simply incomparable.
Currently, all stock trading can be roughly divided into two parts: trading and investing.
Trading involves constantly opening new trades, monitoring trends, and developing strategies.
Investing involves initially choosing the most promising asset, making a purchase, and then monitoring further price changes.
You'll agree that the phrase "I invested my money in Google shares by entering into a short sale" is simply meaningless. That is, any investment is clearly a purchase of assets—gold, securities, real estate, etc.
So what should you choose?
The answer to this question is quite simple: it depends on how much money you have. Everyone comes to the stock market to make money, and earning potential is directly related to capital.
Therefore, no matter how appealing it might be to invest in promising stocks hoping for dividends and price appreciation, you're unlikely to make much money this way, even with $1,000.
It makes sense to plan investments with capital starting from $10,000. By using a small amount of leverage, you can expect to achieve significant profits from long-term investments.
For example, using leverage and purchasing bonds with an annual yield of 4%, you could earn $2,000 in a year, or 20% of your initial capital. Admittedly, that's not much, let alone with a smaller initial deposit.
At the same time, trading offers great opportunities for earning with small deposits. Not only can you use higher leverage, but you can also trade in various directions.
You have the opportunity to profit not only from price increases but also from price declines during crises and market crashes.
And with scalping, you can make significant money even with a deposit of $100. While the risks are high, the potential for profit is quite real.
What else is important?
In addition to the deposit size, the personality of the person entering the exchange is equally important. If you have a calm personality and are used to thinking long and hard before making a final decision, then investing is more suitable for you.
Since speed of decision-making isn't important, it's enough to carefully select a promising asset before opening a trade and set a stop-loss order to protect your money. Then, all you have to do is wait for the results.
Trading, on the other hand, requires quick reactions, the ability to instantly analyze a situation and find the right solutions, a willingness to take risks, and seizing every opportunity to make money.
However, to avoid depriving yourself of all existing opportunities, you can use both trading options. Invest your main capital for the long term in a less risky asset, while using a smaller portion for short-term trading.
Typically, this ratio is 1/10, meaning if you have $11,000, invest $10,000 in stocks with low leverage and use $1,000 for day trading . This way, you'll always come out ahead.
