Updated: Jun 3
If you buy and hold and own underlying assets for a period of time you can make a profit over the long term depending on market conditions. Depending how liquid the market is getting out of such positions would also depend on what everyone else is doing. If everyone is running for the exit at the same time then chances are your order may take a little longer to get processed than others and may not sell at the price you were hoping for.
On the other hand if you are a trader you can get in and out of positions much easier because you are not having to own the underlying asset. Trading futures or CFD’s make use of leverage which allows you to make a bigger profit with less capital and this allows you to set limits on everything from how many contracts to how much you are prepared to lose on each trade whilst also setting a target price you wish to sell at.
When you understand how the market forces operate to a granular level then it makes more sense to be in and out of positions more often cashing in your profits and moving on to the next opportunity. Swing trading or trend trading is a popular way to do this because you can clearly envision the move you want to trade and take a position at the right time with a tight stop (or as tight as possible) and then get out when you have reached your goal.
Depending on what strategy you use it makes sense that you would have some kind of method of when to get in or get out.
Either way if you have a real good idea of what the markets are doing then you wouldn’t really need to be too concerned with what the crowd is doing because you wouldn’t be doing the same therefore regardless of whether you are a buy and hold type investor it all comes down to knowledge at the end of the day.
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