Trading for a living is a dream many people have. It is actually
possible to reach that goal, although it can be difficult. To trade for a
living requires different strategies than long-term investing. Risks
are higher for short-term strategies, but the rewards, especially the
ability to work from home or anywhere in the world, are also high.
The
first difference between trading and investing is the time frame.
Traders are looking for short-term, high-probability opportunities.
Investors are looking for something that can be owned for years and
offer steady gains. Investors will generally need to consider a
company's financial statements. Traders usually look only at recent
price action to make buy and sell decisions.
One popular short-term trading strategy is the 2-day Relative Strength Index (RSI).
Usually RSI is calculated using 14 days' worth of data. Short-term
traders use only two days in their calculation. Buys are taken when RSI
falls below 5, and a variety of sell rules can be applied. The simplest
strategy closes positions five days after they are opened. (more)
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