In an ideal world, traders of all experience levels and budgets would be able to invest in an asset in the long term, sit on their hands, and watch on as the green comes rolling in.
However, the reality is that for investors who trade as their only source of income, proactivity is key, and when undertaken correctly, short-term trading techniques can actually yield better results than holding a position.
Even traders who buy and sell to make some extra cash in their spare time may be better off learning more about short-term trading, as there are more opportunities to profit from opening and closing multiple positions in a session.
There are a variety of short-term trading techniques that can be deployed on a daily basis, including day and swing trading, and those on an even more micro scale – including a 1-minute scalping strategy that can deliver small but consistent wins throughout a session.
Knowledge of these systems is one thing, but knowing when and where to deploy them is quite another altogether. Which markets are the most receptive to short-term trading techniques?
Knowing when a currency is about to explode/implode in value is difficult to predict ahead of time, but the beauty of short-term trading forex is that you only need minute price changes to profit.
Day and swing trading can be deployed with forex pairs, but actually scalping – getting in and out of the market quickly – is arguably the best strategy to use.
You’ll need to be on the ball and keep abreast of all the latest economic news from around the world to pre-empt when a price movement may be about to occur. That way, you can open a position promptly and pick up a couple of pips profit in the blink of an eye.
An appreciation of the analytical side of trading forex – such as the reading of charts and patterns and technical analysis – will also prove incredibly useful, because you are looking to open and close a position within a matter of minutes – seconds even. It’s imperative that you make them count.
Be aware of the type of brokerage you are with also. If your broker deploys a dealing desk, then you simply don’t have the immediacy that scalping requires – so if you plan on becoming a stellar scalper, be sure to join a trading brokerage that uses an ECN or STP model.
Short term trading…stocks
There are many, many professional traders around the globe that earn their living through short-term trades on the stock market.
As ever, the premise remains the same – you’re looking for price fluctuations in a company’s stock with which you can day/swing trade or scalp.
As far as volatility is concerned, forex has nothing on the various worldwide stock exchanges, with company shares seeing pumps and dips of numerous percentage points on a regular basis due to news releases, earnings reports, market sentiment and so on.
While forex is a good place for newcomers to trading to learn their craft, short-term trading stocks is a risky business – but one that can prove very fruitful indeed when you know how and where to act.
As ever, news stories are the key premise behind price moves in stocks, but the key is to buy before the value rockets – and sell at the peak of its rise. In short-term trading, these gains can take place on the smallest of scales and in the shortest of timeframes.
Short term trading…cryptocurrency
If it’s market volatility that you are after, then look no further than the fast-paced world of cryptocurrency.
While Bitcoin and perhaps Ethereum look set to be around for the long haul, the truth is that the world of crypto is packed with coins and digital assets that emerge and then disappear very quickly.
These are ideal conditions for short-term traders, who have no concern with the macro picture and instead focus solely on small price fluctuations that occur every single second of the day.
If you plan on making money from crypto trading, it is absolutely essential that you are familiar with technical analysis. The charts are so important in analysing a currency’s worth, because there can often be no rhyme nor reason to a pump or dip – cryptocurrency is often a law unto itself.
With liquidity and trading volumes increasing, short-term trading is becoming more readily an option, and once you know how to read the charts, there are scores of opportunities available to investors each and every day.
As ever though, only trade with a bankroll that you can afford to lose!