How to Analyze Stocks for Long Term Investing and Short Term Trading?

man excited about his success in stock market


Investment will bloom and generate wealth when the asset class in the portfolio is fundamentally strong and bought when undervalued. But when it comes to trading it is completely different subject and there is no need to be concerned about the fundamentals of a company. Trader gives more importance to speculative value of an asset class. The world of financial markets is filled with complex terms and concepts, and two of the most common ones are investor and trader. An investor invests their hard-earned money into an asset with the expectation of generating a return on investment (ROI) over a long period. Investors generally prefer assets such as stocks, bonds, mutual funds, or real estate. They are generally focused on the long-term wealth creation and hold their investments for years or even decades. Successful traders can make significant profits by speculating the market movements and taking advantage of short-term price fluctuations. Short term trading required more skills and mastering trading psychology is very significant to earn income consistently from the markets. Short term trading required more active participation than long term investing. Investors and traders have different investment strategies, goals, and risk tolerances and approach towards the financial market. Investors focus on long-term growth and use fundamental analysis to evaluate assets and make right investments, while traders aim to make short-term profits and use technical analysis to identify market trends to generate an income. long term investments are done by an investor to generate wealth in the long term and traders utilizes short term trading opportunities to make an income from the market.  With the right efforts short term trading will also provide fruitful returns. Let’s closely understand the two trading concepts and right way to do both investing and trading in the stock market.



Long term investment is the trading concept where investors hold an asset class or financial instrument for more than a year to generate wealth from the market. Long term investors can benefit from the power of compound interest and ride out market fluctuations. Long term investors are not concerned about the short-term market trends. Long term investors need to be well informed about the market condition to make intelligent decision when there is any uncertainty or panic in the stock market.


Fundamental analysis is a method used by investors to evaluate the financial health of a company by examining its financial ratios and economic fundamentals. Fundamental analysis is done by investors with a range of factors, including a company’s financial statements, management, industry trends, and macroeconomic indicators to determine the company’s value with other peer companies to get a clear insight on how the stock is performing. Fundamental analysis provides insight about the actual valuation of a company and its debt trap and financial health, which enables the investors to filter out the best stocks to invest to make a good return in the long term.


Quantitative analysis includes analyzing the financial ratios of a company like operational ratios, valuation ratios, leverage ratios and profitability ratios to understand the financial condition of a company. Qualitative analysis involves evaluating non-financial factors, such as management, industry trends, and market positioning, to determine a company’s intrinsic value.


The intrinsic value of a stock is the perceived value of the company’s assets, financial health and other metrics. Intrinsic value is the estimate of the actual valuation of a stock. The intrinsic value is most prominent in fundamental analysis, as it helps investors make informed decisions about whether a stock is overvalued or undervalue to earn fruitful returns in future.


Short term investment includes holding a stock from one day to less than a year to capture the short-term price movement of a financial instrument to make an income. Short term traders use technical analysis to evaluate assets, looking at past price and volume data to identify patterns and trends. Short term traders use different trading strategies and keep discipline to make income from the markets consistently.


Technical analysis is an analysis for understanding the entry price and exit price of a financial instrument based on statistical analysis of market activity, such as price and volume. Technical analysis helps investors and traders to understand the support and resistance zones for make intelligent decisions in the market. It is used to forecast future price movements and identify trends in the market. technical analysis helps investors and traders to make intelligent investment decisions, manage their risk exposure, and achieve their financial goals.


Chart analysis help the traders and investors to use price action to identify trends and support and resistance levels. Previous price movement and market trends are also relevant for traders to get a clear insight about the stock price. Technical analysis of a stock helps the traders to identify potential support and resistance levels, which can help traders to take high probable trades and can manage their risk exposure if their analysis fails.


Short term traders focus on speculative value of a stock than intrinsic value as short-term traders focus on relevant price points where short-term traders can make a profit out of price movements. Traders discovers different speculative stock values by doing technical analysis with the use of charts, technical indicators and price action of a stock price.


Long-term investment has several benefits, which include

  • Compound Interest
  • Higher Return on Investment
  • Diversification
  • Lower Taxes
  • Capital appreciation
  • Stress free investment method


  • Stock
  • Bonds
  • Real Estate
  • Exchange-Traded Funds (ETFs)


  • Start Early– Legendary investor Warrant Buffet started his investments at the age of 11 and he addresses that he was late to start investments. A person must not waste a moment to start his investments and generate wealth.
  • Set Realistic Goals- It is very prominent to keep the goals and return expectations realistic to become successful in the markets.
  • Diversify Your Portfolio- investor must attain relevant investment knowledge and diversify investment along different sectors to minimize risk.
  • Maintain a Long-Term Perspective – Always keep the emotions away from short term market conditions and investors should maintain long term perspective.

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