Reason why traders should avoid short term trading

Author: Ayesha Jaiswal

Most of the trader in the stock market want to make quick bucks and they do not like to wait for a long time to make money. That's the main reason they choose trading for short term. Investing in a stock market is risky and almost everyone is aware of it but still, too many traders want to invest in short-term trading. It is a good option, but short-term trading is high risk and high return strategy. And if the trader is not so much able to tackle the risk then he might be facing huge loss in the market. A trader can refer trading tips like stock tips, commodity or forex tips to from financial experts. It will help them to take the right decision at right time.

First of all, let's understand what is short- term trading

Short-term trading means using such trading strategies in which the time duration between entry or exits is few days to few weeks. These strategies are executed in the stock market or future market.

Short-term trading can be very beneficial for trading but is risky also.

Some short-term strategies

  1. Day trading – One of the popular strategies used by most of the traders in the market. In this strategy, traders buy and sell a stock on the same day, they do not stay in a position overnight. The main reason behind this is to take advantage of daily ups and downs in share prices.
  2. Short selling- It includes the sale of a security that is not actually owned by the seller, or seller has borrowed this share. Short selling is done by the most trader because they have a belief that a particular stock's price will decline in future and short selling allows them to buy back at a lower price to make income.

Some reasons to avoid short selling

  1. High brokerage cost – Whether you are making money or not, your broker will surely make money by encouraging their clients to trade frequently because the more you trade the more you have to pay brokerage expenses.
  2. Capital gain tax – If you are making purchase and sell in the market frequently then you have to pay short-term capital gain and the tax rate is up to 15%.
  3. Financial losses- Most of the trader enter in short-term trading to make quick money but if things are not properly planned then a trader will face a huge loss on investment.
  4. Short time for decisions – In this trading, an investor has to take several important decisions in a very short time. It gives you less time to react and thus it may result in wrong investment decisions.

Short-term trading offers many methods and techniques to make quick money. The key point is that you need to prepare yourself on how to apply the tools to effectively achieve success. You can also take help of experts with their stock trading tips, binary option trading tips and much more to keep learning and keep earning.