One of the best things about investing in stocks is that you don’t have to follow a huge basket of stocks to make money. In fact, you can just play with one issue and you can ride it up and down. With each ride, you make money.
By sticking to one stock, you can save a lot of time, effort, and money on research. By being laser-focused on a particular issue, you are able to anticipate any quick turns the company might make. You are also able to keep your finger on the company and its industry’s pulse. Here is a quick guide on how to switch from long to short and back again with one issue.
It’s all about the news
Since you are following only one stock, you should be quite aware of the many developments that impact the stock. You should be aware of its competition, its industry trends, and a whole host of factors that can either bump its price up or down. You should track several news trends at once and make predictions as to how it will affect the stock. See if your predictions pan out. Explain why it worked.
Next, wait for another set of news and make new predictions. Once you see if your predictions are panning out, start trading accordingly. Start small first until you perfect a system.
Ride the stock as it appreciates. Drop the stock and sell short when you see that it has ridden the news long enough and there are countervailing forces at work.
Know when to buy back
Once the company is experiencing bad news and much of the bad news you have followed about the company are now beginning to happen, you should then sell the company short. Keep riding it down. Be aware that it might pop up from time to time. You can make money on these by selling short, then buying back right in front of a quick pop. Buy at the pop up and sell when you have made a few percentage points. Then sell again.
Know the fundamentals
While you can ride the stock up and down as you milk some cash from the stock’s movements, be aware that there is a general trend. Know the company’s fundamentals and see if this is in line with the trend. Bet on the stock accordingly. You can bet the bulk of your assets on the long-term trend while saving some cash to make money on the short term swings.