Understanding the popular short term trading strategies in forex market.
Before investing any money in the foreign exchange market, it’s no doubt that traders need to learn Forex first and then decide on certain trading timeframe to be focused on. This issue need to be obviously declared within every trader’s trading plan. While there are three main trading time types, in this article we will focus on the short term trading only.
Brief Explanation of the Popular Short Term Trading Strategy
For your information, there are three primary kinds of trading time perspectives in the Forex market. It includes short term, long term and intermediate term. Depending on the traders’ personality, they will commonly perform one of these three strategies on approaching the market. If you are interested on short term trading, let’s learn more about this trading strategy as follow.
• What Is Short Term Trading?
When it comes to the term “short term”, it is actually so relative. For a position trader, it could mean weeks. On the other hand, short term for a scalper might refer to just less than several minutes. In this article, we are going to identify short term trading strategy as day trading, that engages the trades opening and closing within one-day trading season.
• The Characteristic of Short-term Traders
There is a typical characteristic of a short-term
Forex trader: they usually aims for little to moderate achievements but set off a huge amount of trades on a particular period. Lots of short term traders experience that they are able to take better benefit of “Edge” by counting on the big sample size which is able to be generated by recurrent trading.
For example, when your strategy acquires a 60-percent win rate, there will be a 40-percent opportunity that other trade will be lost. According to this ration, it will be heard of to gain four, five or more repeated losing trades. On the other hand, short term trading strategy offers a big trade frequency that helps traders to counter-balance the result of consecutive losses.
• Timeframes of Short Term Trading Strategy
The most used short term timeframes for foreign exchange trading are now the M1, M5, M30 and M15. As a trader who utilizes short term trading strategy, you should be sure that your data supplier is presenting you real time data of intraday and not holdup or stop of day data. Remember the lower the time frame, the rougher for you to gain more candles.
Best Strategies for Trading on Short Term
Now that you have learned the concept of short term trading, it must be great to let you know that there are three possible tactics to implement this trading strategy within timeframe. One of the tactics that you can apply to approach the market by short term trading is support and resistance trading. This tactic will make technical approach comes to play.
The idea beneath the technical approach is to find essential level within the charts and to place a trade when there is a breakout. In this case, when you find that the price action breaks a level of support downwards, it signals you to open a short trade. In contrast, when the price breaks a level of resistance upwards, go for long trade instead.
The Bottom Line
In conclusion, a short term trading commonly engages trading tactics that are opened and closed on the same day. A trader who goes through the market by trading in short term is likely to focus on moderately small gains, but have an immense trade frequency. Other than this strategy, you need to learn Forex for more to find out another strategy that can benefit you.