Short Term traders

 

In previous article we discussed about intraday traders or Robinhood Traders. In this article we discuss about short term traders and various strategies adopted by them while doing short term trading.

1.       Book profit after a particular gain:-

Short term traders generally rely on tips given by broker, News Channels and for any news on particular stock. They don’t much bothered about fundamentals of the company. They simply book profit in range from 5-20%. They maintain portfolio of high no. of stocks and placed few amount on every stock because out of 50-60 stocks they maintain in their portfolio 1-2 stocks will give them 5-20% returns on a particular day and they will book profit in that stock and switch to new stock.

 

2.       Not booking losses in lose making stocks:-

Generally they have tendency to book profit after 5-20% gain but same they don’t do when stocks are in negative even more than -20%. They will keep on holding the stocks until they will return to profit. They kept on holding these stocks for as much time as possible by thinking that on someday the stock will be in profit for some day. They keep on holding the share even when shares get down by -50%. They simply wants to see profit at the end of year.

 

3.       Looking for stocks which are making daily 52 week highs:-

They generally buys those stocks which are hitting 52 week highs every day without checking their fundamentals. As they think that this stock will give them return of 5-10% in 1-2 days. Sometimes they will be successful but few times after hitting 52 week highs stocks starting the downtrend so at that time they don’t know about the exit levels from that stock leading to wiping out 50% of value in that particular stock.

 

4.       Looking for momentum stocks:-

Every day they are looking for momentum stocks i.e. the stocks which were in momentum on a particular day as they think that these momentum stocks will remain in momentum for 1-2 days at least for giving them returns of 5-10%. But they don’t look into the depth of stock as momentum may be due to some news on a particular day and after that news most of stocks starts falling as it is general practice always said by investors is that “Buy the stock on rumors and sell the stock on news”.

 

5.       BTST calls or STBT Calls:-

They also trade on BTST and STBT calls. They generally buys stocks in limits provided by brokers and sell the stock very next day when stock is giving returns but they don’t follow stop losses what were given in calls and they on holding the stocks for weeks and even for years after arranging funds by selling the stocks which are in profit or by arranging the funds from personal loans or credit card loans. They also not shy away from paying 24% interest charged by brokerage firms on providing the limits.

This way ultimately they will lose their money.

 

6.       Buying stocks before dividend, Buybacks and stock splits:-

To get the maximum benefit from a particular stock they start buying the stocks before their dividend due day, Buyback dates and stock split dates. They generally sees that stocks will give some returns after announcement of above mentioned events.  So they sell stocks after getting dividends, after buyback and stock splits. This might give some returns but never gives them fruitful results as sometimes stocks start falling before the event or after the event so these investors will not get the desired exit point.

 

7.       Accumulation of unproductive stocks:-

By following above mentioned strategies they accumulated lot of unproductive and bad stocks in their portfolio and when they see at the end of year they will found that returns they have earned from short term trades are overtaken by losses accumulated by these unproductive and bad stocks.

 

So we can say that short term strategy isn’t fruitful until you clearly follow the stop-loses. You must have courage to book losses when stocks are not performing and fundamentals of the company get changed over the period of time. Don’t pile up the multiple stocks of same company and microcap companies as microcap companies stocks are more volatile and more probable of becoming zero within few days.

Try to maintain only 20-30 stock at max in your portfolio as you can’t able to track so many stocks and so many sectors at one go. Always buy good quality stocks for returns as per your requirements.