Candlestick Trading Blog
Short term profits are a good thing. An old saying about investing in stock is that you do not have a profit until you take a profit. Successful long term investing has to do with looking at an attractive price to earnings ratio and buying cheap stocks that turn out to be excellent performers with stock price appreciation, excellent dividends, and repeated stock splits. However, not all attractive stocks keep going up in price. Recessions happen. Stock market crashes can halve the price of a good stock. Taking a little short term profit every so often turns the potential for profit into realized profit. Market crashes, market volatility, and the market inefficiency that comes with breaking stock market news all can lead to excellent short term profits. Traders will use time honored tools such as Candlestick charting and Candlestick pattern formations to accurately predict trends and market reversal. Because the price of a stock can bounce back and forth in a turbulent market, traders will make short term profits while long term investors sit and worry about whether the market will “come back.”
There are a number of ways to trade for short term profits. Stock trading, options trading, and commodities futures trading can all be lucrative. There is always investment risk in trading but the use of up to date fundamental analysis of the equity involved and timely technical analysis with Candlestick basics will help the trader see the market as it unfolds. An appreciation of what the market is likely to do will let the trader decide which market and which equity to trade and will help him or her decide upon just trading equities or trading derivatives such as options. The point of looking for short term profits is that a price curve of stock prices is discontinuous. A stock price may be the same on the first and last days of the month but will have moved substantially up and down during every single trading day. Scalping profits from high volume market moves during the week can give the trader short term profits on a stock that ends the month with the same price at which it started. It is possible with excellent market timing to make a substantial profit from a single stock market movement. In a very volatile market a trader may choose buying calls or buying puts or both in order to retain the option to buy or sell if the market moves as anticipated. With a very volatile stock a trader may engage in an options strategy called a long straddle. He or she will buy both a put and a call on the same stock with the same expiration date. If and when the stock price moves substantially the trader will exercise the option. The risk is that if the stock price remains stable he or she will be out the price of the premium. In the case of a huge price move this strategy retains the opportunity for large short term profits while limiting downside risk.Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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