What are the secrets to short term trading…!!
Trading is very lucrative, as well as risky business. It requires a lot of complex strategies. One of the trading approaches, which is getting popular among retail traders is short term trading. Short term trading is defined as using such trading strategies in which the time duration between entry or exit is a few minutes to a few weeks. But before making trades in the short-term trading, one must understand the risks and rewards of each trade. A trader not only knows how to spot short term opportunities, but also how to protect oneself from any unwanted risk. Let’s look at some of the short-term trading secrets:
Keeping a close look at the moving averages:
A moving average is the average price of inventory over a specific period. It is a technique to get an overall idea of the trend in a data set. Moving average is an average of any subset of numbers. The common time frames are 15,20, 30, 50, 100 and 200 days. This gives an idea, whether a stock is trending upward or downtrend. It is quite useful in forecasting long term trends. For example: – if a trader has sales data for twenty years, he/she can calculate a five-year moving average, a four-year moving average, a three-year moving average and so on.
Keep an eye on the market, place orders at market price:
A short-term trader must take advantage of the trend and strictly set the stop loss. A stop-loss order helps in minimizing loss on a security position. It’s better to take note of the previous day’s closing price. It will be quite informative and helpful in forming strategies.
- Understand Overall Cycles or Patterns: The market moves in cycles and patterns, which makes it important to watch the calendar at particular times. Through these cycles and patterns, traders get an idea about what type of position one should make in the future. A trader can use these cycles to determine, either to take a long or short position.
- Entry and Exit control: The timing of entering the market mainly depends upon short term technical indicators. A trader’s choice of stop-loss price is usually based on the previous high and low points and short term moving average indicators. A trader should determine the timing of the entry and exit and strictly control it.
- Risk Control: A short term trader prefers to trade in a consolidation pattern. Short selling is done on the upper edge of the price oscillation interval and more at the lower edge of the oscillation interval. But one should take note that the extremely bullish and extremely bearish trend is necessary to avoid. In such a situation, technical indicators may be passivated and the trend changes rapidly. The principle of risk control is to avoid losing more than the amount one can afford in a day.
- Get a Sense of Market Trends: A short term trader essential quality is to pick the sense of market trend. For instance, if the market trend is negative, then a trader may think about shorting and do very little buying. But if the trend is positive, then a trader may consider buying with very little shorting.
Let’s look at the do’s and don’ts of the short-term trading, which a short-term trader needs to follow:
- A lot of Research: Proper information is the key to achieve success in any field. It also applies to trading. Information plays an important role in successful trading. Before making any strategy, one should carefully read the market conditions through various facts and figures.
- Take calculated and similar risk initially: One can start investing in smaller amounts at an initial stage rather than betting on huge figures. But even an experienced trader who has made a lot of trades always prefers to take a calculated risk.
- Practice Patience: The stock market is a game of patience. The more patience a trader has, the more it will gain in the future. Rather than reacting to every information in the stock market, a diligent trader keeps on the trade until some valid and reasonable information forces him to change his decision.
- Diversify your trades: Never make trades in one particular segment, rather than diversify your trades in various segments. It will not only help in reducing risk, but also maximizing the profits.
- Don’t Panic: Trading is a competitive domain. So, a trader needs to control his/her emotions. Don’t react to any situation, whether to market gain or market loss. An experienced trader responds to every bit of information intelligently. Both uptrends and downtrend are an opportunity for him.
*Disclaimer: investment in securities market are subject to market risks, read all the related documents carefully before investing