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How to earn a regular income from short-term trading

Publish Date: June 10, 2019

By: Sandhya Kannan, Head – Content

Short-term trading in the share market is an effective way to generate an income. So, how do you go about it?

First, you must understand what short-term trading entails. It could include intraday trading, where you buy and sell stocks within a single trading day. It could also include trades where the period between buying and selling ranges from a few days to a few weeks.

Related : How much money do you need to start stock trading

Select the right stocks to earn a regular income

To earn a regular income from your short-term trades, you need to know two things:

(1) When to buy a stock

(2) When to sell it

How do you get your share market timing right? Here are some tips:

  • Assess how stock prices are moving. Observe the price movements for a few weeks. Once you understand the patterns, deciding when to buy and sell becomes easier.
  • Monitor the share market live. Invest in stocks or sectors that show positive movements. Reduce your exposure if you’re expecting major declines.

    • Related : How to identify stock market trends

  • Evaluate the average price: This informs you how the stock has performed over the years. Usually, good stocks show an average that slopes upward on a graph.
  • Diversify your portfolio to spread the risk. That way, if one set of stocks performs poorly, there will be other stocks that do well. So, your portfolio will still generate an income.
  • Avoid emotion and bias while investing. Do thorough research on the track record, earnings, and growth prospects of a company. This will help you to make informed trading decisions.
  • Set up a stop loss. For instance, you may decide to sell a stock if its price declines 15% below your purchasing price. This could reduce your potential losses over time.

    Related :How to buy your first stock

Bottom-line

Short-term trading could become a dependable source of earnings for you. Just make sure to do your homework first. This will help you to make the right short-term trading decisions.

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