Mastering the art of short-term trading

Consider short-term trading as playing Jenga. Each move, each decision, requires that perfect balance. Just as skill and strategy are needed for a well-played Jenga game, successful short-term trading demands precision and a keen understanding of market dynamics.

Let's break down the art of short-term trading block by block.

What is short-term trading?

In the world of trading, 'short-term' could mean anything from a few minutes to several days. Often termed day trading or swing trading, short-term trading involves the buying and selling of financial instruments within a relatively short time frame.

Unlike long-term investing, short-term trading demands a keen understanding of market trends, technical analysis, and a disciplined approach.

How to get started with short-term trading

1. Hit the books and educate yourself

The foundation of any short-term trading strategy lies in knowledge. Stay informed about financial markets, economic indicators, and the factors that drive price movements. Continuously monitor reputable financial news sources to keep yourself updated, and make use of online courses to increase your own knowledge and understanding. The more you know, the more confident you can become to make informed decisions.

2. Get technical with technical analysis

Mastering technical analysis is crucial for short-term traders. It’s all about reading the market — charts, trends, and key patterns. Indicators like moving averages, relative strength index (RSI), and stochastic oscillators can provide valuable insights into market conditions. They are a helpful guide in the often volatile world of short-term trading.

3. Manage your risk and control your trades

Financial markets are fast-paced. Short-term trading involves rapid decision-making, and here’s where managing risk becomes your safety net. Determine your risk tolerance before entering a trade, set stop loss orders to limit potential losses, and diversify your trades to spread risk. Remember, only trade with what you can afford to lose.

4. Develop a trading plan

A well-defined trading plan is the backbone of any short-term trading strategy. Outline your financial goals, risk tolerance, and preferred strategies. Define clear entry and exit points, and stick to the plan even when emotions run high. Keep reviewing and adjusting your plan as you grow.

5. Stay calm and disciplined

Don’t let emotions cloud your judgement and lead you to impulsive decisions. Stick to your strategy, avoid chasing losses, and resist the temptation to deviate from your plan. A disciplined approach will help you navigate the emotional roller coaster that can often accompany short-term trading.

6. Upgrade your trades with technology

Leverage technology to boost your trading efficiency. Use your platform’s trading tools and stay on top of real-time market data. Take advantage of automated trading systems that execute trades based on your predetermined criteria — it’ll help you seize market opportunities without needing to constantly monitor your trades.

7. Reflect, learn, adapt — continuously

The financial markets are dynamic and always changing. Make it a habit to evaluate your performance, analyse successful and unsuccessful trades, and identify areas for improvement. Use every opportunity to learn, and keep adapting your strategies as you evolve with the market.

Short-term trading is a continuous journey that demands a blend of education, discipline, and flexibility. But armed with the right strategies and a commitment to continuous learning, you’ll be equipping yourself with the tools and mindset needed to navigate the markets’ ups and downs.

Practise your strategies with a free Deriv demo trading account. It comes with virtual funds so you can test the waters risk-free. When you’re confident in your strategies, upgrade to a real account to start trading with real money.

Disclaimer:

The information contained within this blog article is for educational purposes only and is not intended as financial or investment advice.

Trading is risky. Past performance is not indicative of future results. It is recommended to do your own research prior to making any trading decisions.