Short Term Stock Trading

Those looking for a good, long term investment strategy would be wise to tap into the stock market.

Because the stock market is an excellent indicator of how well a company is doing, it makes sense to use this tool. The actual value of the company is monitored and the values of their stocks will increase or decrease based on this value. Financial data such as sales figures and growth as well as assets all contribute. The stock market is reliable in that it provides a public forum for this information.

But, the stock market is not just for the long term investor. Short term traders can benefit from the skittishness of the market -- those things that cause prices to rise and fall quickly. This can happen even if there are no real sound financial reasons for it to happen.

How’s That Happen?

There are all sorts of reasons why a company’s stock can suddenly increase or decrease for no apparent reason. Some common ways that this happens are through news reports or government announcements about the economy; even a simple rumor can trigger it.

Some investors get nervous and sell, others see that happening and follow suit. Soon there is a mass sell-off, causing the stock to fall quickly. The same can happen on the positive side as well.

In time, the stock market will settle down and correct itself.

But meanwhile these opportunities are good for a quick trade. Or 2.

That is the province of the short term trader -- the in-and out specialist. There are 3 types of short term traders.

Short Term Traders

Position Traders: Position trading is the longest term trading style. Stocks can be held for quite a while, comparatively speaking -- from 5 days to 3 months. They are looking for fundamental changes in value of stock that comes from financial reports and industry analyses. This is the ideal type of trading for those who invest in the stock market to supplement their income. 30 minutes of study a day is all that is needed.

Swing Traders: Generally the swing traders will hold stocks from 1 to 5 days. They are looking for changes in the market that are driven more by emotion than those by financial statements. The payback can be greater here, but it requires more time on the investor's part. A good 2 hours a day is needed to research stocks and execute orders as necessary. They are looking for trends from which to pick out their opportunities.

Day Traders: Day trading is thought of as risky, but that is primarily for those who are not educated in it. They can often maximize the profit available by buying and selling stocks very quickly, usually less than a day, but often in only minutes. The information that they use is the type that can influence price moves. They need to know when to get in and when to get out. They are rational and analytical. Day trading is a full time occupation.

Which method is the right choice for you? Where do you see yourself on the stock market chain? Anyone can get into it, as long as they get the education they need to understand how the stock market and trading works.