Managing Cash Flow
When you become involved in the stock market, it's important to learn how to compartmentalize your trading account to account for short-term, medum-term and long-term trades.
Short-term trades usually last less than five days and are conducted in order to create cash flow. Short-term trades, by their nature, may come with more inherent risk than medium- and long-term trades.
Medium-term trades. such as straddles and strangles, (straddles and strangles are the most commonly used strategies) typically last 30-90 days.
Long-term trades are designed to grow the net worth and usually last 90 days or longer. Many times the long-term trades involve blue chip stocks, as the goal of the account is to grow the value of the account.
The inability to properly structure the cash flow can be the difference between making a profit and closing the doors. In terms of trading the stock market, the inability to learn how to keep money flowing in the right direction can mean losing the ability to conduct business in the market.
It's important to make a regular assessment of your trading. Perhaps you'll discover that it might be time to change strategies or revise expectations. An honest appraisal of your trading can provide an opportunity to change strategies and potentially move in a more profitable direction.
