Investment is a long term process and the profits take some time to capitulate. That’s the major difference between a trader and an investor. On the other hand, there are share market strategies that yield profits in a shorter duration as well. Online trading gives suppleness in terms of planning your strategies as per your necessities. Here are a few trading strategies for Short-term investments.
Day Trading :
This approach involves buying and selling of stocks in a very short period of time. Day trading is one of the quickest ways to make the investments pay-off. Investors look forward to make profits from the rising share prices in a short-term and hope for the markets to be on the high. Market specialists’ advice that investors should not keep more than 10% of their budget in day-trading as the prospect of achievement in day trading is moderately low.
Margin Trading :
In this approach, investors are likely to borrow a part of the entire sum to buy stocks from the trading account. The first margin is the money which the investor put in to buy the shares and the balance amount is given by the stockbroker who becomes the money-lender in this case. In this case, if the price of the share goes below a certain level, the money-lender will ask the investor to deposit more money to maintain the required margin.
This condition is not apt for both the investor and the broker and is called the margin call. It is not sensible to put money once the margin call is made. In this case, the broker can sell the stocks and get back his own money but the investor cannot cut short his losses.
Trading in options :
This approach gives the investor the option to buy or sell the stock at a pre set price after a definite period of time. There are alternative choices in this strategy. A call option is the right to buy, and a put option is a right to sell.
The three gears to this are option price, strike price, and expiry date. Before the expiry, the investor has the option to sell the stock too.
Some of the important points to be noted here are:
Investors go for the right to buy the stock at a preset price, if the price of the stock is speculated to rise and they go for the right to sell at a preset price if the price is speculated to drop.