Interested In Short-Term Trading? Know These Five Things

When the waiting period between buying & selling stocks ranges from a few days to a few weeks, it is known as short-term trading. Here are five things to remember while trading short-term.

1. Time

Short-term trading gives you a very short window to make trade decisions and might lead to making rash investment decisions and end in a huge loss. It is indeed difficult to keep emotions out of the equation when decisions need to be made quickly. Hence, it requires dedicating ample time in the pursuit of studying and understanding the market if you are considering short-term trading. You have to be ready to take snap decisions regarding any news on the market at any given point in time.

2.Predicting

“No profession requires more hard work, intelligence, patience, and mental discipline than successful prediction.” – Robert Rhea

It is impossible to predict the future, and even psychics don’t get it right. However, it is quite easy to predict the direction a stock will take or an uptrend in the market. These predictions, however, should be a result of hard facts and figures, and not impulse. Analysis should take precedence over emotions when it comes to trying to predict something as unpredictable as the stock markets.

3. Stop-loss

A stop-loss is an essential to short-term trading. No matter how strong your conviction/confidence about the market, it is always advisable to set a stop loss trigger. It is wise to book losses when possible rather than riding on them. You should keep emotions in check and set your target price and stop loss based on available research.

4. Timing the market

Anytime is a good time to invest. However, you need to prevent yourself from timing the stock markets as it is a waste of effort, resources, and money. More important than timing the market is the trend in the market. Of course, there will be few who will make money by timing the market, just as there will be people who will go on to win the lottery. However, why take such a big risk when the odds are stacked against you and your hard-earned money?

5. Perception

The man who begins to speculate in the market with the intention of making money usually goes broke, whereas the man who trades with a view of getting good interest on his money gets rich”- Charles Henry Dow

Stock markets are not devices to earn a quick buck. In short-term trading, it is not what is right or what is wrong, but what the people think at that moment as right or wrong that governs the direction. However, in the long run, the market always comes back to its rational position. Due to one bad trade, the trader should not refrain from trading again as there are chances that he/she might miss out on potential gains. Instead, the trader should analyze what went wrong in the trade and take corrective measures to prevent them. As the stock market is a capricious place, one must always strive to better oneself and make the most of the experience.