13. Short Term Trading Dreams
Short Term Trading: Dreams of Short Term Success
Short term trading can be very lucrative, or it can break your very heart. You must know the market fairly well first and foremost, but you also must know a few things about the individual behavior of the stock that you want to trade. Some stocks are fairly well suited to short term trading, while others simply are not a great choice. Knowing the way that a stock has been behaving between trading sessions is one of the main keys to short term trading success, but there are other factors to consider as well.
Short term trading will focus on these factors, as well as whether the long-term trend of that particular stock is up or down. You should also factor in whether or not the stock market is taking large moves in either direction (up or down) or if it is stagnant (volatility). Are there many buyers or sellers for this stock (volume)? And is the stock market ending with the highs and lows at more extreme levels, ie, higher highs or lower lows (trend)?
Of course if you are planning short term trading, you must have clear conceptual plan in place before you start. How you approach your entrance in and out of these trades can become crucial. There are five main trading patterns that can be used for short term trading, and one main concept that applies equally to all five. No matter how you choose to handle your short term trading, you must have self-discipline. If you do not have discipline, then you should not be buying stocks until you master the concept. In life, there are many things that require such self -discipline, from dieting to smoking, but this can be just as much of a health risk. Your financial wellbeing is at risk, so do not put any of your short term trading plans into action until you have mastered the art of self discipline.
Short term traders can use: trend trading, counter-trend trading, breakout trading, pullback trading and reversal trading, although this latter term is not so much a type of trading as it an overall part of the whole picture in a short term trading strategy. Trend trading has the least in common with short term trading, and requires some extra patience that might not really be available to the short-termers.