Trading is a completely different business compared to investing. When you invest, you should look for companies with a sound business plan, having share prices close to their minimum of 52 weeks.

Your goal is to hold the stocks for a minimum of 1-5 years or even longer. An undervalued stock with a price unfairly knocked down is a good thing for a patient investor.

By contrast, stocks reaching new highs of 52 weeks are more appropriate for trading. This is because traders are more interested in the stock chart patterns than in its business. As a trader, you’re trying to keep a stock for up to a month or two, but more likely for days, hours, or even just a few minutes.

Trading can be exciting, and it can be nerve-racking. Not everyone is cut out to become a trader – it takes a person with a gut of iron and nerves of steel. Above all, the business requires discipline.

Is The Stock Trending Up or Down?

You could have a trading insight from a news story or even an instinct, but you should never really place an order without analyzing the stock’s chart.

A stock that is in a general downtrend is rarely appropriate for trading.

You can determine the stock’s trend by looking at its one-year chart, and connecting the peaks over time and its spikes down over time (its depressions). In general, professionals only risk their capital in stocks that are trending up over time.