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THE TOP FIVE WAYS TO CHOOSE STOCKS FOR SHORT-TERM INVESTMENTS




Your trades depend a lot on how you choose which stocks to buy. When you invest
in the stock market for a short time with the goal of getting better returns
than other government programmes by buying good stocks, there are a lot of
things you need to think about before deciding which stock to buy.

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And figuring out which factor is the most important can help you choose a plan.
A stock market strategy is your plan for how you will trade and invest your
money in the markets. It can be based on basic or technical research, events in
the news, or any other similar method. Here, we’ll talk about some common but
effective ways to pick the right stocks for short-term investments on the stock
market.

FIVE WAYS TO CHOOSE STOCKS FOR SHORT-TERM INVESTMENTS

1. A PLAN BASED ON MOVING AVERAGES

The average price of a stock over a certain amount of time is what is called the
“moving average.” Moving average can be 15, 20, 30, 50, 100, 150, or 200 days,
for example. The moving average is usually shown on a chart as a line that
slopes up in a bull market and down in a bear market. Most of the time, moving
averages with a longer time period are called “slower,” while moving averages
with a shorter time period are called “faster.” When these two lines meet, they
make a signal to buy or sell, which can be used as a strategy for picking
stocks.

On a stock chart, for example, if the 50 DMA line crosses over the 200 DMA line
from below, it would be a good time to “Buy” the stock because it has more room
to go up.

2. BASED ON THE WAY THE ECONOMY WORKS

This is a more basic way to choose stocks to trade in the short term. Every
business that sells a seasonal item has a clear pattern to its business. In
India, for example, paint companies see a rise in sales around Diwali because
it’s a time when people clean and decorate their homes, the weather is good for
painting, and wedding season follows the holiday season.

So, sales go up for paint companies around October, November, and December. For
short-term analysis, this type of analysis, which looks at a company’s business
cycle, sales, profits, etc., can be used to choose stocks.

3. THE STRATEGY OF GOING WITH THE FLOW

People know that many stocks on the market follow the trend of the stock market.
You can also use these as short-term investments when the markets look like they
are about to go up. This can happen right after a downturn in the markets, when
there hasn’t been a big change in the markets’ underlying structure. In these
situations, a good way to make money is to choose the stock that matches the
index.

4. KNOW THE LEVELS OF SUPPORT AND RESISTANCE

This is also a technical way to choose stocks, in which you figure out and map
the price range between the stock’s highest and lowest prices. This can be
useful for holdings that only last a short time, like a week or two. These two
levels will be the stocks’ “support” and “resistance” levels, and they can be
used to make short-term trades.

5. HOW TO USE CANDLESTICK PATTERNS TO FIND TURNS

This is another way to choose stocks for short-term trades based on technical
analysis. In this, you follow candlestick patterns to look for a change in the
current trend. Simply put, reversal means going in the opposite direction. Since
most stock markets have only two fixed directions, up and down, a reversal
strategy looks for when a stock is about to change its direction from up to down
or down to up.

A candlestick is basically a chart made up of shapes that look like bars and
have lines on top and bottom. These lines, called candles, show how the price of
the stock has changed over time.

A candlestick chart shows how the price of a stock, derivative, currency, or
commodity changes over time. In a candlestick chart, the “candle” is made up of
the information about the “open,” “close,” “high,” and “low” for the time the
candle was made.

A fixed order for the candles can help you figure out when the price of a stock
or security will turn around. There are many reversal patterns, such as the
bullish morning star, bullish hammer, shooting star, three-white soldiers,
bullish harami, etc. These patterns are signs that stock prices will change, and
you can use them to trade in the direction that the change will happen.

CONCLUTION:

You need to choose the right instrument as well as the right strategy for
short-term investments. Sometimes shares are the best tools for your trading
plan, and sometimes futures and options are better.

Another important thing to think about when making trades is how willing you are
to take risks. You should never trade more than you can afford to lose, and you
should try to practise good trading hygiene, which basically means using a stop
loss and following the basic rules of investments.

You can also get help from a SEBI-registered investment advisor if you want to
invest in the markets for a short amount of time. This person can show you the
best and most appropriate options for you.


Tagged short-term investments


AJITH KUMAR




POST NAVIGATION

⟵ India’s top stock broker
How to pick stocks in India for long-term investments ⟶


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