Day trading strategies: the complete guide with all the advanced tactics for stock and options trading strategies. Find here the tools you will need to invest in the forex market

CHAPTER 26:
 
 
Portfolio Diversification
ay traders generally execute trades in the course of a single
trading day while investors buy and hold stocks for days, weeks,
months, and sometimes even a couple of years. In between these
two extremes are other forms of trading. These include swing trading and
position trading, among others.
Swing trading is where a trader buys an interest in a commodity or stock
and holds the position for a couple of days before disposing of it. Position
trading, on the other hand, is where a trader buys a stake in a commodity or
stock for a number of weeks or even several months. While all these trades
carry a certain element of risk, day trading carries the biggest risk.
A trader with the necessary skills and access to all the important resources
is bound to succeed and will encounter a steep learning curve. Professional
day traders work full time, whether working for themselves or for large
institutions. They often set a schedule which they always adhere to. It is

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never wise to be a part-time day trader, a hobby trader, or a gambler. To
succeed, you have to trade on a fulltime basis and be as disciplined as
possible.

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Introduction to Diversification 
Diversification is considered an effective risk management technique. It is
widely used by both traders and investors. The gist behind this approach is
that investing funds in just single security is extremely risky as the entire
trade could potentially go up in smoke or incur significant losses.
An ideal portfolio of securities is expected to fetch a much higher return
compared to a no-diversified portfolio. This is true even when compared to
the returns of lower risk investments like bonds. Generally, diversification
is advisable not only because it yields better returns but also because it
offers protection against losses.