Short-term trading, as the name suggests, is a trade that investors perform for a shorter duration of time. Short duration trades mean that the transactions executed by the investors are closed down within days, weeks, or sometimes even a couple of hours based on the trader’s decision.
In addition, Short term trading does not make the traders invest their money for longer durations and years. However, this trading mode is quite popular amongst beginners who check out the Sensex index and start trading with the motive of making instant profits.
Here we list down a few strategies that one can adopt while getting started with short-term trading:
Start trading small
Do not be in a hush-hush to start your trading journey as a beginner. As a piece of advice, consider focusing on one or two stocks at a time during a session. When you have fewer stocks to monitor, tracking the performance of stocks becomes a bit easy. Also, fractional shares are all in trend these days because it allows investors to deal in smaller amounts that you can afford to invest.
To understand this, let’s give you an example: if a company’s share is trading at 1000 dollars, you do not have to invest 1000 dollars because many brokers even allow you to invest an amount as small as 10 dollars. This may also go down to 1% of the total share but may vary from company to company.
Besides gaining insight about Sensex today, also keep yourself up to date with the latest news, trends, and events that trigger price variations in stocks and affect the market. May it be some important announcements, quarterly results, interest rates, financial news, and other economics. Keep yourself informed about all such things about the company whose stock you have purchased or are planning to purchase.
Have a calm and composed mind
Stock markets can turn out to be highly volatile at times and may test your nerves. But patience is the key. You need a calm and cool mind to execute the trade while keeping the excitement, greed, fear, and high hopes at bay. Also, you should never let your emotions conquer your mind and act with logic instead of being emotional.
Time your trade
Price volatility is a common, especially during the morning hours when the trade begins. A well-versed trader is aware of the volatility factor and can recognize the change in patterns and accordingly invest his/her money to make profits. But newbies may not have such an understanding of the patterns. Thus, it is always a good idea to wait for about twenty to twenty-five minutes before making a move.
Additionally, Markets are less volatile during noon time and soar high during closing time. Rush hours can bag opportunities, but it is always safe to avoid investment during rush hours until and unless you transform yourself into a pro from being a newbie.
Set aside a separate amount for trading
To get started with trading, do not use your bankroll without a plan in mind. Firstly, decide how much money you can spare for trading purposes. Set the amount aside, and only then start trading with the money.
In the meantime, trading does not only earn you profits all the time; there may be times when you may have to encounter losses. Hence, it is easy to conclude that there are risks involved in trading. So before you start investing blindfolded, understand the risk factor and only invest that much amount that you can afford to risk.
Have realistic goals for profit-making
Everyone enters the stock market with the notion of making money, but all your trades cannot end up being profitable. Even the most successful investors are assumed to make a profit out of only 60 to 70% of their shares. So, be realistic about your profits and losses, and do not expect skyrocketing profits. Accordingly, plan out when you have to seek an entry and when you have to exit fixing a clearly defined profit margin.
Abide by your plans
Do not just chalk out a plan but follow the same by your mind and heart. To make a fast move, do not tend to skip your rules and plans. Instead, you need to be disciplined enough to follow the trading strategy that you have set. This will prove to be of great help in chasing your dreams. Also, do not get swayed away by emotions, and bear the mantra of planning your trade before making an investment.
These were a few strategies that every beginner should swear by while entering the trading market. Of course, short term trading requires a lot of expertise and practice. But in order to succeed in the long run, don’t just follow your gut feelings, but do your own research and follow the strategies mentioned above to kick start your trading journey on a profitable note.