Short Term Trading Strategy
In the world of forex trading, trading strategies can be determined based on many aspects, ranging from the selection of time frames, the type of analysis used, to how to read charts. However, when viewed in general, most traders prefer short-term trading strategies. This type of trader usually wants to get certainty of profit and loss as soon as possible. Thus, short term traders tend to be diligent in entering positions within a day, because the trading principle is a little too often.
Understanding Short-Term Forex Trading
Short-term traders make multiple trades over a given period to accumulate profits ranging from small to medium volumes. Short-term traders usually have a large transaction frequency which helps traders to balance losses. The most popular short-term time frames for trading in the forex market are M30, M15, and M1. In addition to short-term trading, there is also scalp trading, which is trading for a very short period of time and lasts only a few minutes.
A short-term forex trader is a trader who makes transactions and closes a trader's position within a 24-hour period or on the same day. Short-term traders will usually open many transactions with the aim of achieving relatively small profits from each transaction. The goal of many short-term traders is to generate a stable monthly income based on the implementation of the trader's strategies in the forex market.
SHORT-TERM TRADING TIPS
There are several tips that traders can consider before starting short-term trading, namely:
Determine Stop Loss Level Through Careful Calculation
This is so that traders can treat the amount of risk tolerance before calculating the nominal profit. The point is, it is not profit that is the most important, but risk measurement that needs to come first. Instead of chasing profits, you should secure traders' trading funds with the right loss setup. Traders can use the risk reward ratio calculation to determine the profit and loss ratio.
Patiently Waiting for Momentum in the Market
In making short-term trades, traders must be patient waiting for price movements in accordance with the trading plan that has been made even though at that time the price was floating loss. That way, the trader will know where the error is, so he can evaluate his trading plan for the better.
Calculate Money Management Carefully and Carefully
Price movements in short time frames can be very fast and beyond the trader's control. The widening of the spread is also a scourge for short-term traders. For this reason, traders must always be careful if the spread suddenly widens when market conditions tend to be volatile.
Support and Resistance
Support and resistance is one of the best strategies in short-term trading. If the price breaks the support level downwards, the trader should open a trade in the short term. If the price breaks the resistance level upwards, the trader should open a trade in the long term.
The risk management of this strategy is very easy. Place a stop loss order beyond the traded level. For example, if a trader opens a position long after a resistance breakout, the trader should place a stop loss order below that resistance level. If a trader opens a position shortly after a support breakout, the trader should stop above the support area.
Traders must determine the optimal exit position. In short-term transactions, traders want to exit orders quickly, and avoid those short-term transactions becoming long-term deals. This concept is very important to understand. Sometimes, whether we realize it or not, traders let their positions get out of control, usually when they are losing. And when this happens, the daily trading session turns into a long-term one with a large loss. So traders need to set a short timeframe and make sure to use stop loss and take profit.
The next strategy that will be discussed is the trend. This strategy aims to catch the trend of the day and continue to use it. When a breakout appears, the trader must close the position. This action will create another opportunity on the chart against the previous order. Now traders can trade in the direction of the breakout.
Traders try to follow the developing trend. One way is to use the trendline tool and place a stop below the trendline. Follow the stop when the price moves in the desired direction. Stay in the trade until the price breaks the trend. Traders can also trade trend breakouts. For a trend breakout, the trader will aim for a price movement equivalent to half of the previous trend.
Traders look at the chart for candlestick reversal patterns on small time frames (M15, M5, and M1). When a trader encounters a reversal candlestick pattern, open an order after the price breaks the high or low levels in the expected direction. Stop on the opposite side of the pattern and hold the order until the candlestick size is complete.
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