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The term short term investors
has multiple definitions and it has a lot to do with the individuals personal
risk appetite. The personal decision by the individual trader is the key reason
for deciding to be a short term investor. Some traders make the decision to be a
short term investor, for an extended period of time possibly days, weeks or even
a few months. Others decide to attempt to control their short term investment by
cashing out their position before the end of a market session. Still others,
known as Day Traders, hold a position for minutes – protecting their possible
pre-determined profit amount and exiting their position into a run whether it is
on a long position or on a short selling position. The final trader is known as
a swing trader. The swing trader will enter a position at either a
pre-determined price or a determined position based on their charting
experience.
Most day traders or short term
swing traders make certain that any position they have entered for a market
session is closed out prior to the closing bell, for that day. This trading
action assists the traders in controlling any potential unexpected losses due to
news that could come out, whether on a particular stock or other market
effecting news, after the closing bell for that market day.
Certain short term investors
will analyze a particular stock, determine a potential entry price as well as, a
potential exit price, based on their expected gains for any one trade. At the
same time, an informed trader will also set a pre-determined stop loss in an
attempt to control their losses.
At no time should any trader,
short term investor, day trader or swing trader ever prepare to enter any
position without a pre-determined stop loss. To do so, is just plain foolish.
Why would any trader, in their right mind, even think of entering a position
without having a stop loss in place?
Now long term investors,
generally seasoned investors, are prepared to lose their entire investment
because most will only risk capital they can afford to lose. In reality, any
trader, day trader, swing trader or short term investors should only ever trade
with capital they can afford to lose. A key note for anyone considering
investing, whether long or short term, is the issue of investing in a short sell
position. When you invest in a long position, there is only so far to the
bottom. However, when you invest in a short selling position, there is no
ceiling as to how far a stock can go up.
So, to sum it up, be wise in
your investment decisions. When your money is gone – it’s gone!
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