Short Term Investors has Multiple Definitions
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!