Common Sense Tips for Investing Success for Short Term and Long Term Investors.

April 20, 2009 by kutenk
Filed under: Investment 

You Can be Successful whether you are Short Term or Long Term Investors. It’s my view that almost any sound strategy can result in profits as long as you have a plan and implement it with discipline.

Available Capital is a Determinant

Many first time financial market investors — as opposed to property investors — start with quite a small amount of capital. This limits diversification and the ability to have both long- and short-term accounts. For this same reason new traders find short-term trading a more appealing strategy, as there is more scope to achieve highly leveraged returns.

Higher Leverage Means Higher Risks

Highly leveraged returns are synonymous with higher risks. Therefore, if you pursue a more active strategy, and you are intent on protecting both your capital and any accumulated returns, it will be essential to implement prudent risk management practices.




It is common for ambitious new traders to tackle short-term trading as their first option or strategy. This may work for some but for many it is risky, as skill and experience are vital to be successful in trading short-term moves in the market. It takes a keen eye, a sharp brain and great discipline.

Risk Management is Essential

To manage your positions with discipline you will need to have a solid knowledge of the markets and their workings, and be clear on the methodology you will adopt as your mantra.

If you lack the knowledge and skill required then you will be taking on unnecessary risk at an early point in your investing career. Remember, eroding your psychological capital can be much more damaging than eroding your financial capital.

If you decide to be a short-term trader it is essential to use market analysis software and, in addition to your own study, undertake a training course. These are critical tools for your business. As you would not begin a new business venture without training or the right equipment, nor should you expect to start the business of investing without the right preparation. However, I constantly see kindergarten investors taking to the big slippery dip of short-term trading before they are ready.




Risk needs to be managed according to investment style. Stops are integral to risk management. Placing a stop when you buy defines an exit if things go pear -shaped. A stop may indicate a breach based on technical reasons, a dollar move, a percentage move or a time period. For example, a highly leveraged trader may use a stop loss of 0.5 to 2 per cent, whereas an investor may use a stop loss of, say, 5 to 10 per cent. As you can see, risk management will vary according to the leverage you take on and whether you are investing for the short or long haul.

Knowing the Markets’ Nature

The nature of the markets at any one time can have an influence on whether you are a short- or long-term trader. Volatile or choppy markets may prove too difficult to trade on a consistent basis. Trading such markets can be an intense experience and is not a pursuit many can persist with for very long. On the other hand in strongly trending markets (whether they are up or down) you may be able to push out your trading horizon, obtain some great experience and make good money—all at the same time. Adapt your style according to the market’s style.

Personality and Lifestyle are Important

Your own personality can be a good guide in helping you decide whether you should be predominantly a short- or long-term trader. Some like the fast pace of short-term trading, and need action all the time — the more the better. This type of personality is usually more compatible with short-term trading.

For some the reverse is true. Many people prefer a low-key, considered approach and take a longer time to make a decision. This type of personality is better suited to the longer term perspective.

Commitment and Hard Work

Investing is not the end goal but it can be a part of any balanced lifestyle. What I do know is that after the hard work you will achieve success and there is little doubt that success can give you wider choices in life.
Be committed and you will succeed. Too many set out on the path of short-term trading expecting it to be a walk in the park only to give in far too easily when they are faced with a few setbacks.

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