Investology

Understanding Short Term Trading

Short term trading may not work for all people. For one thing, trading on the short term usually requires more work and effort from the trader since it essentially takes more trades to maintain for a longer period of time. Short term trading is characterized by making trades that last for as short as a few minutes between buying and selling to as long as a few days.

Basics Of Short Term Trading

There are several basic concepts that short term traders should understand and follow in order to be successful. Since short term trading may be conducted under relatively riskier situations, it is important that these basic concepts are always strictly followed and understood. This will ensure that the right trades are always made at the right times.

Reading Cycles and Patterns

Since markets generally trade in cycles, short term traders should try to look more closely at the trading calendar at particular times. There are certain periods where certain market gains are generally experienced on the average. Having a good understanding of these cycles can provide short term traders with an idea on when to enter into long or short positions.

Market Trends

Short term trading is also highly dependent on trends, the short term trader should have a good sense of determining what the current market trend is and then decide whether to do little buying or selling depending whether the trend is negative or positive. Since short term traders already work under a situation where there is a relatively higher level of risk, working against the trend may further worsen that risk and limit their number of successful and profitable short term trades.

Moving Averages

A moving average is basically the average price of a certain stock over a certain period of time. Watching over whether the moving average of a certain stock is going upward or downward is very important for short term trader to determine when to enter and exit positions quickly.

 

Tags: short term trading