Short-term trading strategies for beginners

Short-term trading strategies for beginners
Table Content
How to short-term trade?
Types of short-term traders
Top 5 markets to trade short-term
Best indicators for short-term trading
Short-term trading strategies
Range trading
Breakout trading
Reversal trading
Remember

If you read it on the news, chances are it’s already old. That’s the catch for short-term trading. Being up to date with the latest business publication isn’t enough in this game. Short-term traders use the market’s unpredictability and rely on milliseconds to profit from price movements. Predictability is measured and oftentimes enacted in fluid markets, which, over time, can amount to valuable gains. Anyone looking to profit from small price movements and short-term trends should continue reading. After that, trust that you will be all set to start short-term trading on our digital platform.

How to short-term trade?

To succeed in short-term trade, you must accept risk and learn to thrive on patterns of uncertainty. 

In our beginner’s guide to short-term trading, you’ll get an idea of the benefits of active trading, away with investing and passive funds. Often associated with speculation, short-term trading relies on highly volatile stocks and doesn’t even necessitate one to buy and sell a financial product to stay active as a short-term trader. 

Trading in the short-term will influence the outcome of your positions and, overall, will depend on your trading goals and the recurring capital you are willing to risk. 

Instead of buying and selling, short-term traders can benefit from derivative instruments such as CFDs and spread bets. Contracts for difference, or CFDs, can track the value of underlying instruments to ensure payoffs. In contrast, spread betting relies on placing a speculative bet on price movements without ever actually owning the instrument itself.

Types of short-term traders

1. Scalpers

Scalpers can profit from minimal price changes by opening positions no longer than a few seconds and minutes. As a trading style, it is by far the shortest out there and will rely on frequency to benefit from recurring profits off the top of a market trend. Be advised that scalping is both time-sensitive and time intensive. 

2. Day Traders

As the name suggests, day traders will buy and sell assets within a single trading day and avoid paying overnight costs. Day trading with short-term prices means you can rely on the frequency and small market movements. 

3. Swing traders

This is the longest style of short-term trading, lasting days or sometimes weeks. It is also classified as a medium-term style as it takes advantage of lengthier movements too. Swing traders rely on technical analysis to identify entry and exit points in each trade. Whether opting for short-term vs. long-term trading, swing traders can feel comfortable in both.

Top 5 markets to trade short-term

  1. Crypto 
  2. Commodities
  3. Shares
  4. Indices
  5. Forex 

Best indicators for short-term trading

Using the best technical indicators can make a big difference to the success of your short-term trading strategy and can be used in the above top 5 markets. As a mathematical equation, a technical indicator will use price data (OHLC) displayed in a candlestick chart to identify overlays and underlays. Basically, what that means is that with a technical indicator, your chances of measuring uncertainty such as trend, volatility and overbought or oversold conditions in a timely manner are now way simpler. It can also help you identify buy and sell signals. 

Here are some of the best technical indicators out there for short-term trading. Each holds the option to use customized settings to suit your needs as you mature your short-term trade. Remember, reliable short-term trading opportunities come about when all four indicators work together. These are known as:

  1. Moving Average (SMA or EMA) for Trend following
  2. Relative Strength Index (RSI) for Momentum
  3. Average True Range (ATR) for Volatility
  4. Money Flow Index (MFI) for Volume

Short-term trading strategies

Range trading

If you need support and resistance, then look no further. A range trader operating on a shorter outlook can benefit from skimming quick profits from small movements. For this strategy, it’s most common to make use of a momentum technical indicator such as RSI. 

Breakout trading

This strategy will allow you to enter a trend as early as possible before the market price shifts out of range. What that means is that you will be able to identify a point at which there is a change in market sentiment, and indicate volatility before a trend takes off. To this end, limit orders are a key tool to enable traders to automatically enter a trade by placing their order, so you will not need to monitor the market continuously. Many breakout strategies use volume indicators such as the money flow index (MFI).

Reversal trading

This refers to a change in direction, a turning point in market sentiment. Focusing on the immediate price reversal can provide quick profits for short-term traders who are able to identify the most advantageous price levels. Reversal trading will follow two segments under RSI, either a ‘bearish reversal’ to indicate a downward market or a ‘bullish reversal’ where a market can become an uptrend.

Remember

Execution and pricing technology are key. Short-term trade finance does rely on technology to compete with time and the speed of execution needed to exit positions fast and efficiently. In short-term strategies, fast execution can be the difference between profit and loss.

Therefore, it is important to use a platform engineered to give you speed, stability and the best prices possible. Try out amana and see a world open before your eyes!

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