Short-Term Stock Pick Strategies

By Stock Research Pro • March 28th, 2011

Short-term stock picks are often viewed as a more risky investment than buying and holding stocks for the long-term. In fact, over the long-term, the average well-diversified portfolio should see about ten percent returns. That said, short-term stock investment opportunities do present themselves to savvy investors who know what to look for and who have the risk tolerance for this strategy. Successful short-term stock investors enjoy access to their gains and can be a very lucrative approach to stock market investing when the right opportunities are seized.

Approaches to Short-Term Stock Trading

Generally speaking, a short-term stock trade can mean anywhere from several minutes to several days. To find and seize the right opportunities for short-term gains, investors should become familiar with the following terms and strategies:

  • Moving averages- Moving averages is a term used quite often by all stock investors, but especially technical analysts, to refer to a set period of time, which might be 200, 100 or 50 days. Shorter timeframe such as 15, 20, or 30 days are often used as well. In observing moving averages an investor can easily determine whether a stock’s price is trending upward or downward and act on that observation. For example, a short-term gain might be realized by shorting a stock that is found to be in decline.
  • Breakouts and breakdowns- Investors who can recognize them and act quickly can exploit price movements that break through levels of resistance (breakouts) and support (breakdowns) under the theory that once either of these levels is broken, the price will continue trending in that direction.
  • More about support and resistance

  • Pullbacks- A pullback strategy is executed by purchasing a stock that has had price weakness for a short period of time and then selling that stock when it demonstrates temporary price strength. The caution to investors who leverage this strategy is to make certain that the trend they are seeing is not a price reversal.
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    The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

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