In order to create and close positions in a short period of time—typically days or weeks, though it can be much shorter—short-term trading is a strategy. Retail and institutional traders that want to profit from slight price changes and passing trends are particularly fond of this type of trading approach.

In contrast to conventional investment strategies, short-term trading is typically a more speculative form of trading. This post will go through a number of short-term trading techniques, including swing trading, intraday trading, and scalping, as well as how to begin short-term trading on our web platform and any charges and dangers involved.

Short-term vs Long-term trading

Short-term trading sometimes entails the use of derivative instruments, such as spread bets and CFDs. Leverage is a requirement for short-term trading on our platform, which improves your exposure to the financial instruments but carries a number of risks. Some investors favor a long-term buy and hold strategy, which requires them to pay the entire position’s worth up front.

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Short-term trading strategies

Scalping

Some traders employ the extreme short-term approach known as scaling. In a matter of seconds or minutes, they want to enter and leave places. On a typical trading day, scalpers execute hundreds of transactions, which increases the risks. The FX and commodities markets are where this method is most frequently applied.

Day trading

The most well-liked short-term trading method that may be used to any asset class is day trading. Day traders do not hold holdings overnight since they buy and sell a variety of instruments throughout the day with the goal of closing out positions before the market closes.

Swing trading

Traders can determine whether an asset has future potential for profit by looking at the swing highs and swing lows of its price. This method, which is particularly well-liked for stocks, calls for a lot of forethought and forecasting. Swing trading refers to when traders hold open positions for a number of days or weeks.

Short-term trend trading

Both short-term and long-term trading techniques can benefit from trend trading. In this situation, a short-term trend trading strategy would concentrate on trends that appear on price charts for a short period of time—say, a few minutes, hours, or days—and may not last longer than this.

The foundation of a short-term trend-following strategy is the belief that an asset’s price will stay in its current direction for the duration of the position you are holding. Normally, traders would attempt to buy an asset (go long) if it were trending upward or sell the item (go short) if it were trending downward.

Trendlines are one of our draw tools that traders on our platform can use to assist spot trends that might be beginning or ending on a price chart. These can also aid in identifying trends that had previously seemed to be trending steadily. By the minute, hourly, or daily intervals, among other chart timeframes, short-term patterns can be analyzed.

How to short-term trade

1. Get a bank account. You will first have access to a demo account through a live account, where you can practice short-term trading with fictitious money.
2. Choose your product from CFDs or spread betting. Our most popular derivative, spread betting, enables trading tax-free* in the UK.
3. Check out our assortment of financial markets. Within the FX, share, commodity, index, and treasury markets, we provide more than 10,000 financial instruments.
4. Choose a short-term trading plan. Scalping, day trading, and swing trading are common options; each has advantages and disadvantages. Other noteworthy tactics include breakouts, reversals, and momentum trading.
5. Refresh your understanding of technical analysis. When analyzing price data, chart patterns, technical indicators, and support and resistance levels might be useful.
6. Implement risk-management measures. When trading in choppy markets, stop-loss orders, especially GSLOs, can be useful for limiting losses. All through the trade, you should keep a tight eye on your positions.

Example of short-term forex trading

In this illustration, we’ll make predictions about the price changes of the USD/JPY currency pair using a forex scalping method. This cross is frequently employed in scalping since it is one of the most actively traded forex pairings globally, offering strong liquidity and, occasionally, volatility.

Multiple opportunities for a forex scalper are shown in the chart below. A typical viewpoint for this kind of trader is represented by the candlestick chart, which has been modified to reflect 30-second intervals. We have inserted buy and sell signals (using our sketching tools) at potentially advantageous times to enter and exit the transaction.

As a result, scalpers might open a buy position with the expectation that the price will rise further when the bars are green for a number of bars in a row. The price action will reverse when the bars begin to turn red, and scalpers may then choose to short sell the currency pair to limit losses. Scalpers can carry out this activity repeatedly throughout the day to benefit from minute price changes, known as pips.

Example of short-term stock trading

Using a day trading approach, we’ll make predictions about the fundamental price fluctuations of Goldman Sachs shares in this case. Day traders require liquidity and volatility, and both are typically available during the first hour of trading on the stock market and the hour before it closes. A 15- or 30-minute chart is a common timeframe to employ in day trading since it enables traders to analyze price activity and emerging or breakout patterns. Again, possible entry and exit sites have been marked on the chart below.

The rising trend for today is, as you can see, largely consistent. Day traders might initiate a buy position at the start of the trading day (in this case, after US trading hours), and then close the transaction to prevent carrying it over to the next day.

On stock charts, this strategy is useful for preventing overnight slippage and gapping. Between the closing of the previous day and the starting price, Goldman Sachs’ share price increased from $294 to over $297, as shown above and highlighted in yellow. Once the current trading day came to a finish, the share price overnight fell from $308 to $303. As a result, traders who carry over positions risk suffering losses as a result of swift price swings that they may not have expected or for which they did not establish a stop-loss.

Short-term trading fees

When using our platform for short-term trading, a number of fees need to be considered. For key currency pairs, FX rates begin at 3.3%, while shares begin at 20%. Also applicable to our margin trading service are the following fees.

Spreads: These are included in the instrument’s buy and sell prices and will be listed on your order ticket when entering values.
Holding expenses: Any deals that are held overnight, such as swing trades, will incur holding expenses. These are determined by the applicable holding rate for your instrument and are determined at the end of each day.

Commissions:When you start and exit a trade, only share CFDs are affected by this. Depending on the nation from whence the particular share is issued, commission rates change.

To prevent an account close-out, make sure you have enough money on hand to cover all of the aforementioned expenses. Take a look at a summary of our trading expenses, which also include stop-loss and market data charges.

Best technical indicators for short-term trading

The most effective technical indicators for short-term trading techniques typically have shorter time horizons and can aid traders in determining entry and exit locations. To get the greatest results and analysis, technical indicators should not be depended upon alone and should be used in conjunction with other trading tools. Nevertheless, below are a few examples of successful indicators that are frequently used for short-term trading.

Moving averages

For short-term trends, a simple moving average (SMA) typically employs a duration of 15–20 days. The moving average will begin to slope higher if the asset is on the rise. On the other hand, you may search for a moving average that is falling or flattening if you want to sell and go short on an asset.

Relative strength index

By comparing a security’s relative strength or weakness to other market assets, the relative strength index (RSI) aids in identifying overbought or oversold levels for an investment. A value of 70 often denotes overbought conditions, whereas one of 30 or less denotes oversold conditions. By observing divergence, failure swings, and centerline crossovers on a trading chart, the RSI can also provide buy and sell signals for short-term traders. When negative momentum is slowing down, some traders can choose to purchase on a fall and sell on a surge, respectively.

Stochastic oscillator

Based on the closing price range of a financial instrument over a brief period of time, a stochastic oscillator can be used to determine whether it has a good value. The stochastic lines indicate that the instrument is overbought when they are over 80, which may cause a trader to sell. A trader may be prompted to buy when the stochastic lines are below 20, which indicates that the instrument is oversold. It can also be utilized as a component of a divergence approach to forecast short-term trend reversals.

Short-term trading software

The short-term traders are the target market for our Next Generation online trading platform. We offer a variety of chart types and timeframes to suit your approach, whether you want to practice scalping, day trading, or swing trading.

Indicators, drawing tools, a chart pattern scanner, a client sentiment tool, and other helpful features are among the several technical trading tools that the software also offers. More details on trading using the acclaimed Next Generation platform can be found by watching our platform trading tutorials.

Short-term trading app

With a smartphone or tablet device, are you looking to trade on the go? For both iOS and Android devices, our short-term trading app is compatible and has earned honors for Best Mobile/Tablet App. Our mobile-friendly application allows you to track open and future vacancies. On any screen, we guarantee full order ticket functionality, scalable chart kinds, and customizable layouts.

So that you never miss a trading opportunity or piece of market news, you may also set up price, execution, and calendar alerts to appear via SMS, email, or push notifications. See more information on how to set up trading notifications.

Short-term trading tips

• Determine when it optimal for you to trade. When the market is most liquid or sees the most price movement will vary depending on your strategy. In order to reflect the previous second, minute, hour, day, week, and so forth, you can change the timeframe settings for your chart.
• Examine the chart’s patterns. The ability to forecast future price movements can be utilized to identify patterns like triangles, wedges, head and shoulders, and double top and bottom.
• Think about risk management. Some short-term traders like to position their stop-loss within 10% to 15% of their buy or sell order’s placement. In this approach, losses can be managed and shouldn’t outweigh gains, however this isn’t always a given.
• Watch out for gaps or slippage on price charts. Since short-term trades are completed quickly, the price at which your order is filled can differ from the price you requested. Limit orders and our boundary trading technologies come in handy in this situation.
• Use a demo account to practice. Before making a genuine live transaction, you can acquire access to our platform and practice short-term trading with fictitious money.

Summary: is short-term trading profitable?

In conclusion, short-term trading can be a very effective strategy for traders to profit on little price swings that could otherwise go overlooked from a larger trend viewpoint. If successful, short-term tactics like day trading and scalping are highly beneficial for generating incremental gains throughout the day. However, keep in mind that starting a position in short-term trading entails additional risks and expenses that should be considered.