With the Dow Jones breaking record after record, it is very easy to see why the stock market functions as the fast track to financial freedom for many traders. The good news is that you don’t have to be a Wall Street broker or an MBA holder with extensive experience in capital markets to enjoy some of the amazing windfalls Wall Street is capable of producing. You only need to have the right strategy, the right tools, an eye for spotting opportunities, and, most importantly, the emotional make up to know when to dive in and when to let go. Read below to see how you can invest in the stock market for some quick profits.
Defining quick profits
Thanks to the huge amount of stock and options traded in the stock market on a daily basis, it is very possible for even small traders to make quick profits. If you are interested in getting in the market for a quick payday, you have to first define ‘quick profits.’ Your definitions set your expectations, and your expectations determine how you respond to certain events while you’re playing the stock market for quick profits. You have to enter this game with a clear mindset. You can’t be fuzzy-headed or else the wild roller-coaster ride your investments will take might send you to the nuthouse. While many different people would define ‘quick profits’ differently, we could all agree that ‘quick profits’ mean making money from stocks in the shortest time possible. Note that this definition doesn’t define quick profits as involving low risk. The truth is simple: if you want to make lots of money and don’t have much time to make that money, you have to take lots of risk. As the classic Wall Street saying goes, the higher the risk, the higher the return. Quick profits are all about big returns.
The main driver of quick profits: Risk
As mentioned above, if you want quick profits, you have to make risky bets. You simply can’t get the return you’re looking for if you take low-risk bets like government securities. If you want to make quick and substantial profits, you have to take risks. The good news is that there are many different levels of risk you can undertake. Keep reading below to see how you can pick among different risk levels and manage the risks you take with your investment money.
Different stock markets: big boards, over the counter
Most people have heard of the NYSE or NASDAQ. However, these are just the most well-known stock markets. There are other markets which are riskier like the Pink Sheets and OTC:BB markets. These stock markets focus on the risky market for penny stocks. Don’t let the name fool you. If you want to make quick money in a relatively short time, you should investigate penny stocks. They are very risky. Many appreciate quite well but don’t have enough a big enough market of buyers. Sure, your stock has gone up in price, but no one wants to buy the whole lot you’re ready to unload. Also, these smaller stocks are less regulated than equities listed on the big boards. Still, if you want to invest very little and see your investment zoom up in price, penny stocks offer lots of opportunities. They also offer lots of chills and thrills.
Emerging market risk
If you don’t want to play the local Big Board and you don’t want to mess around with penny stocks, you might want to try trading in blue-chip stocks of emerging market economies like Turkey, Brazil, India, and other countries. The great opportunity with emerging markets is that they often rise up when many investors from developed economies would buy up index stocks. By buying non-index or more speculative emerging market stocks, you take on lots of risk. There is an information gap. Often, many of these developing equity markets don’t have transparent rules. Still, the general rise in the broader market can result in huge spikes for lesser-known, but otherwise fundamentally sound, emerging market stocks.
Quick profit strategy: trade on momentum
If you want to play the Big Boards but you want to take lots of risks so you can snap up some big gains, you can try trading on momentum. You need to pick a stock that has a wide daily range between daily lows and daily highs. Also, the stock has to have a huge daily volume. These two factors ensure that you can get in and out quickly. Track the stock for some time until some news comes out that drives the price lower. Put in a programmed order with your online trading platform to buy the stock once it hits a price that is lower than its current price. Once you’re in, pay attention to its momentum and be ready to click the sell button at a moment’s notice. You’re riding the momentum of the stock. You didn’t buy it to hold on to it forever. Once you reach your target appreciation (measured in percentage points) or there’s some bad news, sell the stock. Alternatively, you can subscribe to a stock charting service and put in a programmed order to sell the stock when it hits a certain resistance level.
Quick profit strategy: use a month to month profit window
While day trading and quick trades make for quick profits, you might have to jump from stock to stock depending on the trends for those particular stocks. Another approach is to stay within a particularly volatile stock but trade it on a month to month window. You buy in at a very low point for the month and you closely watch the stock for a month. You either exit when it spikes up really high during the month or you leave the stock once a month passes This strategy prevents you from hanging on to a stock for too long.
The secret to quick profits: Don’t get emotional and don’t get attached
Regardless of which strategy you choose, the secret to quick profits in the stock market is to never get emotional. Don’t get greedy when everyone is buying. Don’t get too fearful when everyone is dumping. In fact, it pays to be greedy when everyone is afraid and to be fearful when everyone is getting greedy. Finally, you have to make sure you don’t get too attached to your positions. Don’t keep thinking that you only need to hang on to ‘get back’ all the money you’ve lost. Learn to let go and focus on the upside to recoup your investments. Otherwise, you might be waiting for a long time, and your loss might become permanent.
It is possible to make quick profits with the stock market. People do it all the time. Every single day, in fact. The good news is that not all these people work for big banks, investment banks, or hedge funds. Many are regular small investors like you. The key to making quick profits is to have a healthy appetite for risk and having the right strategy.