4 Things you should keep in mind while buying short-term stocks

Why we call Short term Investing?

Stocks that we generally buy or sell for short-term (1/3 months, sometimes 6 months also ) to get some money is called as short-term investing. But for Traders and large investors, Short-term stocks or investing in Short-term stocks calls up when they buy or sell the stocks after specific action or news held in the stock/company.

What news make stocks to buy or sell for short-term?

Corporate actions such as Debt Reduction, Deals with other companies, Acquisition of small companies, Merging with other big corporates and all other important actions make Stock to buy or sell for short-term. Posting Good results also attracts investors to buy the stock for short-term. Sometimes exceptional good results attracts long-term investors also.

4 Things You Should keep in mind while buying stocks for short-term!

1) Make Your Target Aggressive:

While you buy any stock for short-term, you have to make a target for your stock after which you would strongly exit from your stocks. Not thinking about the future of stock after crossing your decided levels for exit, just exit whenever your targets hit. For Example, My friend Buy a stock name ABC. The current value of ABC in market is Rs.35. He decides to exit from ABC after crossing levels of Rs.38. After 1 month, stock of ABC starts trading at Rs.37.90/38.20. My friend afterwards decide to long his position for Rs.41 as a new target. After almost 2 months, stock begins trading at Rs.40.95/41.10. After this, My friend again set new target of Rs.46. But trading at Rs.41, Stock of ABC suddenly cracks to Rs.33 in just 2 days. My friend after gaining so much good returns losses everything that he gains. This is a real accident, and many investors also faces such things. That’s why, I highly recommend to decided a strong target for your exit and whenever stock hits your target, just EXIT.

2) Analyse why are you buying stock for short-term!

Before buying any stock whether for short-term or long-term, consider why are you buying that stock. Sometimes we get attracts to buy stocks only by watching sudden jumps in them. For example, stock of ABC was moving flat from last few years. Then a sudden jump in the stock attracts my friend to buy it. ABC that was moving around Rs.38 suddenly jumps to the levels of Rs.45 in just three days. But my friend enters in this scrip around Rs.44. Just like stock had jumped, stock cracks down to Rs.34 and my friend got loss. This teaches that buying stocks at high levels is not safe every time. So try to buy stocks at lower levels rather than buying them at upper circuits. This would be very risky for you.

3) Analyse the Fundamental story of company

Before buying stock, consider to research about company. Buying stocks in volatile time without getting enough information about the company can be risky for trading. Sometimes, stock starts moving 10% up & down much faster and become volatile before any major news. Investing in such stocks can also be risky. But Research is not mandatory in every case. Sometimes, stocks that have good charts can also indicate, whether you will earn or will loose.

4) Analyse the trend of Stock!

Analysing Charts for buying stock for short-term is also good. If you are buying stock that was around Rs.65 in 2014, Rs.42 in 2015, Rs.26 in 2016 would have chances to create loss this time also. While if you prefer stock which was around Rs.48 in 2014, Rs.87 in 2015, Rs.108 in 2016 would have chances to give you positive returns.

Have any question related to this post? Feel free to ask through comment box given below.


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