This is Future Indices, This is Short Term Trading !!!

This is Future Indices, This is Short Term Trading !!!

Making money in times of market uncertainty

My grandfather used to liken everything ti fishing, driving a car, drinking beer, even my grandmother. One that was particulary relevant was the stock market. : it’s a changeable beast,” He used to say. “ you don’t want to be using the same technique everytime. “One of those techniques he taught me was short-term trading. Once mastered, it will allow you to make profits on the stock market even during times of unpredictability.

Short term trading isn’t day trading ; the actual holding term can be as changeable as the market itself. Generally, the rule for successful trading is to use the longest holding term you can. But in a choppy market, long term trading will usually always result in losing profits.

Successful short term trading is done by capturing the market trust, just before the breakout, and in today’s market, that is usually between two and three days. Also, keep in mind that often breaks out will retest the breakout area, emphasizing the need to get rid of these stocks quickly. When trading this way though, there are golden rules to follow :

1) Know when to exit

This is the hardest part of short term trading. Many lose here here because they hang on that little bit longer and end up losing the lot. My grandfather used to say to exit at any sign of weakness in the market. Short term trading is about taking small profits quickly. It can pay off to take a risk, but risking it all is simply not worth it. Besides, a small profit is better than none at all.

2) Watch the market constantly, even if you are not trading

Look especially at what happens to the breakout. Winning short term traders have a good understanding of current market trends. While no one gets it right all the time, practice does greatly improve your odds of getting it right.

3) Mind the gaps

These occur when the market opens the next day, greater than when it closed. This happens in the market constantly, and usually, they are always filled within the first half hour of trading. So when buying for a short term trade, it is usually better that you wait until the first half hour to hour of trading is done.

On the whole, short term trading is more difficult than trading longer term. But still, regular traders should know how to use the method when he market warrants.the same technique is not going to be successful everytime, especially in a game as changeable as the stock market. You have to have an arsenal with just a much variety.

( from ASIA TOMORROW Nov.2004 )