Short Term Investment

There are two things a person may be looking for in a short term investment. One is a place to park their money that is safe and pays better than a bank savings account. The other is a way to profit from the ups and downs of the stock market. The first just has to do with checking out interest rates on T Bills, CD’s, and other short term debt instruments. The second is where technical analysis tools such as Candlestick pattern formations can help a person to trade stocks and make a substantially better profit than the bank offers or even what one can gain from long term investing. The fact is that what one considers useful stock investment information will differ between long and short term investment.

Short Term Investment Profitability

Short term investment in stocks can be extremely profitable. It can be more profitable, over the years, than long term investing. This is because the rate of return on long term stock investment is typically not linear. Market volatility, market trends, and market reversal all affect stock prices, even of the most stable of stocks. Doing basic and fundamental analysis of stocks and then reading market sentiment with Candlestick analysis gives traders and short term investors the ability to buy stock and sell stock at the most opportune times. Short term investment capitalizes on buying at the bottom of a price curve or short selling just as a market correction hits. Longer term investment depends upon analysis of intrinsic stock value and a stock’s margin of safety. Short term investment thrives on the precise analysis of stock price changes that Candlestick signals provide.

Timing a Short Term Investment

How one approaches short term investment will depend upon the investor’s time frame. If an investor needs his funds in a few days he probably should stick with a money market account. If his time frame is a month and he absolutely must have his initial capital he probably ought to stay short term and deal with his bank. Short term investment, for those with investment capital, capitalizes on short term movements in stocks and is not simply a means of parking ones money until it is needed for another purpose. That is not to say that short term investment needs to be risky. The investor can choose conservative investments. Short term investment uses options trading to insure against risk while nailing down market opportunity in stocks, commodities, and futures. By buying puts or buying calls on a stock the trader pays for the right but does not incur any obligation to buy in the case of a call option or sell in the case of a put option, should the price of the stock move as anticipated. He will use Candlestick patterns as a guide to where the stock price will go next. He will trade options as a backup in order to reduce investment risk. When the market moves as predicted by his reading of Candlestick stock charts the investor will make short term profits. If the anticipated stock price movement does not materialize the short term investment is only short the premium paid for the option. And, as always, check out investing tips with your own analysis before jumping in.

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