Daytrading with Scottrade or Stock Trading with eTrade? Mistakes Not to Make

Daytrading investors never ask…Do I care about the company I am buying?

Value Investors might ask…Which online stock trading brokerage firm is better eTrade or Scottrade?

Time to ask the question, which type of investor are you…really?

Daytrading or Value Investing

While there are endless individual investors out there they basically fall into two categories. Value investors prefer to use some technical analysis for stock trading decisions. Discounted cash flow analysis and return on equity calculations can help you determine whether a company’s stock is cheap or overpriced at a given time.  Scottrade and eTrade both offer some research tools, but learning to value a stock takes more in depth study of a company’s financial information.  You can use earnings ratios and pricing history with any of the online brokerage firms. However, there is no substitute for being able to read and understand financial statements if you want to become a value investor.

Forex not eTrade for Daytrading

Successful daytrading is different.  A typical Pattern Day Trader prefers high powered mathematical algorithms to achieve positive results. Unfortunately, no major investment houses currently offer analytical tools that day traders might use. While day traders try to determine whether stock prices are rising or falling incrementally they are not necessarily any more successful in the long run compared to their value investing counterparts. Sophisticated stock trading tools can’t help someone too driven by greed to see bad company fundamentals.  More importantly, the average person day to day stock trading will lose money to taxes and losses over the long term because the stock market is erratic in nature.  Even when a daytrader makes large gains in a typical day, most often just like the casino..the house wins in the end!

The Investing Recommendation – Ditch Daytrading

The best approach to wealth is a slow and steady stock investing approach.  Learning the financial fundamentals will make you a better investor in the long run.  Do you know what the best net income to revenue ratio should be to determine a stock’s potential (hint:  above 10% is a good start).  Do you know how many years of earnings and balance sheets to examine when looking at a company’s financial statements?  Good patterns…and bad ones take years to bubble to the surface.  Price history may not show a company’s true colors for years.  Start with learning the fundamentals..stay tuned Inckpen will be offering some tutorials to help.

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