Mastering a Short-Term Trading Strategy


A short-term trading strategy has been developed to be used within a matter of hours or even minutes. These trades are placed on instruments such as stock indices, currencies and equities to maximise profits in just a few days or weeks.

The significant benefit is that there is little risk involved for the trader since they aren’t holding onto any positions overnight or over more extended periods, which could incur losses if the markets are volatile.

Identify the Market Conditions

These will dictate what sort of trades you should look to take and how you should execute them. You need to understand that it’ll be easier for you to execute profitable trades during periods of volatility. If prices are moving fast, then there’s more room to make money from price fluctuations as many traders fear missing out on opportunities, leading to high volumes being traded.

Look at the Candlestick Charts

Once you’ve identified a promising trading opportunity using traditional analysis tools such as trends or support and resistance levels, it’s time to move onto your charting platform. At this point, we would recommend looking at candlestick charts as these will provide you with a lot more information about possible price direction and identify individual trends much more quickly.

Buying Calls or Puts

Once you have acknowledged where the prices are going, it’s now time to open up your trades. In this example, we’re looking at short-term trading on CFDs. You want to buy a CFD for the lowest price possible, then sell it off when it reaches its highest point. It is buying calls or puts on stocks.

The best way to determine whether you should be buying calls or puts will be by looking at the current market volatility. You need to assess whether prices are going up or down and which direction they are heading in. If there are heavy movements, the chances are that you can make quick money by opening up your trades right away without having to wait too long for prices to reach their highest/lowest points.

Cash in on Your Profits

A successful short-term trading strategy will see you generating money quickly. However, sometimes the price of a stock or index can be unpredictable and spike up or down very suddenly. 

If this happens, it may be necessary to close out your position before the predetermined time frame is up. It is known as ‘closing out’ your trade – you are locking in any profits before they disappear. 

Generally speaking, you should also aim to take some of your initial investment off the table so that even when closing out with a loss, you’ve still made some money overall.

Close Out Your Trade

Once your specific timeframe has expired (the life of your call/put), it’s time to close out your trade. The simple goal here will be to either sell for profit (if you held a call) or cut any losses (if you held an open put position) and then move on to your next trade. It’s how successful short-term trading strategies work. 

To be a profitable trader, it’ll be up to you to make sure you stick with this strategy over time while remaining aware of market conditions at all times. You don’t want to get carried away or make a rash decision about any particular trade; instead, try and follow a disciplined approach to maximise profits without increasing risk too much.

In Conclusion

This type of strategy is all about timing your trades correctly and making the most money from quick price movements. You’ll find it easier to make money from these types of transactions during times of volatility if you use candlestick charts instead of standard bar charts and trade calls or puts depending on whether a stock’s price is likely to go up or down. 

It’s also worth noting that you should take any profits or losses that you’ve managed to accumulate once your specific timeframe has expired. Then move straight onto your next trade so that you don’t alter the risk profile on any one investment too much. You can practice your strategy on Saxo.