What is the Best Strategy for Short-Term Trading?

Short-term Trading can be very profitable, but also high risk. This type of trading attracts traders with the possibility of earning fast money. Unlike medium and long-term trading, the main focus of short-term trading is to make decisions quickly to buy or sell. In this article, the JustForex team evaluates all the nuances of this type of trading activity.

In short-term trading, orders are opened for short periods, ranging from a few minutes to several days. Traders earn profits by trading on shorter timeframes. Short-term trading is usually carried out during the most volatile periods. Trade is mainly driven by technical analysis. At the same time, you must not forget about fundamental analysis.

The following styles can be referred to as short-term trading:

• Scalping. This method is considered the most aggressive method. Scalper gets results from short price movements, the duration of transactions ranges from a few seconds to minutes. They generally use M1 to M15 timeframes and execute several dozen up to hundreds of orders per trading session.
• Day trading. This method is used by traders who prefer to trade in one day and open one position for several hours. Day traders choose a chart for the M5 to H1 timeframes. Day trading is not too risky and stressful compared to scalping. Profits are usually obtained at the end of the day.

To use scalping and day trading, you need to have plenty of time to spend sitting at the computer all day. As a rule, short-term trading requires high attention and also high tolerance for stress.

Short-term Forex Strategy

There are several forex strategies used for profitable short-term trading. Let's look at the most popular ones.

1 Support and Resistance

First, you need to determine the support and resistance levels at a higher timeframe (M30-H1). In this interval a significant support or resistance level is formed. Therefore you must identify these levels first, so you need to switch to a lower timeframe (M5-M15). Trading is carried out at the breakdown of these levels or when a rebound occurs from it. Breakdown of the channel, line resistance or support is a good choice for trading signals. Complying with this strategy will be useful, especially for traders who have just started trading.

2. Moving Average

Moving Average is one of the technical indicators used in the Forex market. MA is an indicator that helps predict price movements, while determining the dynamics of support and resistance levels. Moving averages are called trend indicators: if prices are above the MA, prices follow a bullish trend and vice versa.

Simple Moving Average (SMA) and Exponential Moving Average (EMA) are the main types of MA. SMA is formed by calculating the average price for a certain period. This allows traders to confirm trends. Compared to the Moving Average, EMA has a smaller lag effect and is more likely to reveal trends.

For trading using short-term trends, the JustForex team recommends using a short curve. Forex traders often use the moving average crossover system to enter the market. This is formed from a slow MA and a fast MA. When the MA is slowly broken above the long one, the price may reverse and rise. Experts also recommend using a moving average when there is a clear trend in the market.

3. Moving Average Convergence Divergence (MACD)

MACD indicator is an oscillator that allows traders to identify trends and look for signals. This is formed from two moving averages and histograms. MACD calculates the difference between fast and slow moving averages. If the histogram crosses zero level, you need to consider the signal to enter the market. The MACD indicator gives a sell signal when crossing zero levels from top to bottom.

4. Candlestick patterns

Traders look for candlestick reversal patterns and enter the market in the direction indicated by certain candlestick patterns. The signal appears when the price crosses the level of the candlestick pattern. Every trade must be protected by a stop loss. The following technical analysis and Price Action patterns are the most popular among traders: Triangle, Flag, Pennant, Double Top / Bottom, Inside Bar, Outside Bar, Pin Bar, and others.

To succeed in short-term trading, traders must follow the rules of money management. Short-term trading is associated with risk, so don't forget to use a stop loss. Some tips that I can share this time about Best Strategy for Short-Term Trading. Hopefully it can be useful and good luck.