About a month ago I decided to stop day trading the stock market. I believe the stock market is difficult to trade right now. From what I've heard from other experienced traders, trying to trade the market during a downtrend is a lot more challenging than trying to trade the market in an uptrend.
For example, I think if I was day trading in 2020 after the pandemic, it would have been a lot easier to trade. That was a hot time for the stock market and a lot of stocks were very bullish and the market was overall in an uptrend. This uptrend continued all the way through 2021. However, starting in January of 2022, the market started to pull back and has been bearish and in a downtrend all year. I think it’s possible this downtrend will continue until 2023.
When I first started trading, I was mostly focused on trading shares of penny stocks. Then I started trading options with mostly Blue Chip stocks. Finally, I tried trading e-mini futures. I tried many different strategies, but I wasn't able to find consistent success.
Day trading can be very challenging because the market is designed to trap day traders. If you are familiar with day trading, then you may have heard of liquidity traps or liquidity events. This is basically when price action occurs that causes day traders to stop out or sell and this creates liquidity in the market. These liquidity events make it difficult for day traders to manage risk with stop losses.
I’m still interested in trading stocks, but I think the best strategy is to consistently add funds to a portfolio with a long-term strategy. With this long term investing strategy, you don't get caught up in the daily up and down price action. The key is to invest money with at least a 5-10 year time horizon in mind. Historically, the stock market has done well over the long term and I do believe it will continue to do well. Investing in blue chip stocks long-term is the best way to make a consistent return. I will look to diversify my long-term portfolio with stocks that I think will do well over the long run like Apple, Amazon, and Google. I will probably use a small percentage of my portfolio for high-risk stocks, but a majority of my portfolio will be in the big tech stocks I mentioned above, because I am confident in those stocks for the long term.
Happy investing everyone! For day traders, long term traders and everything in between, I wish you luck!