Tuesday, May 6, 2008

Trading stocks for long term growth

When people think of long term they think of investing. Buying shares of companies that will one day be huge. They rarely ever think about trading. Even though trading can offer a better long term solution then investing in many cases.

Let me clarify what trading is. Unlike investing trading is attempting to time the market. Enter, make a profit or loss, and exit. It is really that simple. The idea is that with the right system you can still make a profit on average, month after month.

Many traders will only be in a trade to a few days, maybe a month. So, how can trading help you make long term profit? You have to reinvest your profits. Instead of spending the money you make if you reinvest your profits back into the stock market you can let your money grow at an exponential rate.

This method can be many times over greater than investing. That is because it deals with compound interest over short periods, not years. Let us compare the two.
You have $10,000 and want to let it grow for 10 years. You have two options. You can invest it or trade it.

If you invest it and pull out 20% a year, after 10 years you would have $61,917. You have made a good sum of money. Not enough to live off of, but a decent amount.

If you chose to trade it however and pulled out just 5% a month, after 10 years you would have $3,489,119. That could make you a millionaire many times over. This is all due to compound interest which is what trading is built off of.

For more information on trading the stock market visit http://www.stocks-simplified.com

1 comment:

Investor Tool said...

the problem is we need a good trading system.