How to Find the Best Short Term Stock Market Opportunities
While the stock market is primarily a vehicle for long-term investment, investors can sometimes find some short-term trading opportunities, especially in a volatile market. Of course some stock picks will be better than others, and there is no guarantee of success. But if you want to make a bet on the short- term fortunes of a company, you stand to benefit handsomely if your timing is right.

Step 1
Open a brokerage account if you do not have one. Consider using a low-cost online broker like TD Ameritrade, E*Trade or Scottrade since this will reduce the cost of your transaction.

Step 2
Keep an eye out for stories about publically traded companies, especially negative stories. When negative news breaks about a particular company, investors often overreact to the news and send the stock price down further than the company deserves.

Step 3
Make a list of the companies you hear negative things about, and check the price movement of the company stock. You can use online resources like CNN Money and Yahoo! Finance to track the price movement of each stock. You can also create a spreadsheet where you enter the daily price of the stock to see how it is affected by negative news.

Step 4
Use the stock information you find at these online sites to look up the price to earnings ratio, or P/E, of each stock. The P/E represents the relationship between the price of the stock and its earnings per share. For instance, a stock that earned $2 last year and is currently trading for $18 per share has a P/E of 9, while a stock with $3 in earnings nad a $21 share price has a P/E of just 7.

Step 5
Compare the P/E ratio of the stocks are you evaluating with others in the industry. If the stock has a lower P/E ratio than similar stocks in the same industry, it could be a good buy. For instance, if one computer manufacturer has a P/E of 12 while others in the same industry have P/Es of 20 or more, the stock with the P/E of 12 might be undervalued.

Step 6
Set a mental price target before you buy a stock for the short term. Determine ahead of time how much money you need to make before you sell a stock. Short term trading can be rewarding, but it can be very risky as well. Setting a mental price point allows you to lock in any gains and avoid losing your money if the stock goes back down.
This article may be used, republished, referenced and/or cited in part or in its entirety as long as the author/source is clearly and explicitly credited (see bio information)
© 2011 - All Rights Reserved Website design by Sakshi Infoway Pvt. Ltd.