If you lost income due to the COVID-19 pandemic and you weren’t able to make that one-time $1,200 stimulus check stretch – you’re probably looking for ways to make some extra cash.
The usual “side hustles” like driving Uber or selling extra stuff isn’t profitable or safe in our era of social distancing, so you’re left with few options. However, there’s one avenue you might not have considered.
If you’ve ever contemplated trying your hand at trading, quarantining presents a terrific opportunity to do it. You’re stuck at home, so you have the time to research, practice, and, hopefully, make some extra cash from trading.
But how do you get started? Let’s jump into the best trading options and go over some of the first steps.
Trading Methods for Quick Cash
If you’ve listened to any traditional investment advice, you’ve probably heard a lot about how investing and trading is a matter of throwing your money into the market and letting it sit there until retirement.
While that might be a decent strategy for future planning, that’s not how to utilize the stock market for a quick cash turnaround. If you want to make money now, there are a few different types of trading to consider:
- Day Trading
- Swing Trading
- Forex Trading
Each of these trading methods has some serious pros and cons. So, how do all these compare?
Comparing Different Trading Methods
Most of the people who are making money every day are doing day trading. But what is day trading? Day trading is simply buying and selling positions (usually stocks) over the course of one trading day. The goal is to earn tiny profits on every single trade so that eventually, it will add up to substantial gains.
Day trading is not for the anxious. You have to act and react quickly or risk losing money and missing out on huge gains. It’s aggressive and focused on quick, short-term payouts.
Swing trading is very similar, except, rather than holding a position for one day (like day traders), you hold the stocks for a couple of days to a few weeks. So, while you don’t have the daily payout potential of a day trader, there’s a bit more breathing room to allow positions to mature, which can lead to larger payouts.
In either case, with day trading or swing trading, you’ll be focused on large-cap stocks with lots of liquidity. You’ll need to understand the market and do constant analysis to get substantial returns. However, it is possible, and many people are doing it.
Shorting is different because you’re borrowing stocks from your broker. The goal in shorting is to sell the borrowed shares and then repurchase them when they have a lower price. You keep the difference.
For example, you borrow 1,000 stocks valued at .50 a share from your broker. You sell all 1,000 of those shares at .50. Then, you wait until their price drops. Let’s say you wait until they drop to .25 a share. You repurchase them, return the shares to the broker, and keep the $250 difference.
Shorting is appealing because you don’t need a bunch of capital to get started. However, it’s risky, and losses can multiply quickly.
Forex trading is a whole different animal. Forex is short for foreign exchange, and in forex trading, you’re exchanging cash from two separate countries. Like trading stocks, you have to do an incredible amount of research, but the earning potential is high.
In contrast to the stock market, the forex market is open twenty-four hours a day, seven days a week. Forex trading requires more leverage (at 50:1) and has fewer regulations than the stock market. This means there’s more earning potential but a whole lot more risk. With Forex trading, you’re tracking eighteen different currencies versus thousands of different stocks on the stock market.
Which Trading Method is Right for Me?
Ultimately, the right trading method depends on your style, risk tolerance, and initial starting capital. You’ll want to do a little digging on all the different methods to see which is right for you.
Be sure to research the markets and understand what you’re doing before putting real money up. Don’t trade with anything you can’t afford to lose. Remember, you can make extra money trading while quarantined, but you can also lose it trading, too.
However, if you do your research and commit to understanding the markets – trading could provide the extra cash flow you need during these uncertain times.
Skylar Hammond is a writer for True Trader who specializes in topics such as stock trading, personal finance, and forex. He focuses on helping beginners and experts alike learn more about the market and improve their trading skills.