When it comes to financial trading and investing, there are hundreds of strategies that can produce profits. However, the majority of trading and investing strategies are focused on the medium to long term.
If you seek to make a quick buck, the best way is to use scalping methods, which are strategies that depend on fast trading styles.
Many of these strategies rely on 1-minute and 5-minute timeframes and will catch several pip movements many times each day. Let’s discuss and list some of the most popular scalping methods and styles that are known for producing quick results.
The appeal of short-term trading strategies
In today’s fast-paced lifestyle, short-term trading might seem appealing to make quick profits and replace the traditional 9 to 6 job. However, traders need to take into account that scalping requires utmost attention to detail to cut losses quickly and capitalize on profits.
It is difficult to develop viable scalping strategies for novice traders as these methods require experience, discipline, and a high-alert mental state so as not to miss something. Traders need to select the pairs with the lowest spreads and commissions to ensure trading costs are low. Only selecting pairs that offer substantial volatility with low spreads will allow traders to generate considerable profits.
Scalping methods offer several benefits to traders, including:
- Quick gains — scalping methods use 1-minute timeframe charts most of the time, allowing traders to detect and capitalize on tiny market movements quickly. Since traders can open and close many trades per day, scalping is never boring and brings quick profits.
- Flexibility — When holding positions from seconds to minutes, it is possible to close trades and avoid getting exposed to market volatility quickly. This is especially true for avoiding major economic news trading. Scalpers can just close the trade and wait till extreme volatility subsides and continue trading.
- Lower risks — Scalping means quickly closing trading positions with tiny profits or tiny losses, which are substantially lower than other strategies. Trend-following and swing trading strategies have much larger stop losses.
Scalping is also exciting and rarely gets boring. Traders have to be alert and pay close attention to charts. Scalping eliminates risks of overtrading as it requires traders to open many positions and traders do not have time to get bored and trade out of boredom.
Top Short-Term Trading Techniques
There are several short-term trading methods available, and everyone should select the one that suits their personalities the best.
Scalping: Skim Profits Like a Pro
Scalping is all about making multiple trades throughout the day. Mostly, traders can expect to open more than 10 trading positions per day with small but quick profits. Scalping can be considered as an art of skimming tiny profits that can quickly add up to substantial gains by the end of a trading session.
There are several scalping methods, including order flow analysis and news-based trading methods. Some scalpers might analyze higher timeframes and detect important technical levels, then switch to lower timeframes and aim for small movements on these technical levels. Technical indicators could also be used to detect quick setups and capitalize on them.
Day Trading: Ride the Intraday Waves
Day trading simply means to buy and sell assets within the same trading day. Generally, day traders close trading positions within one trading day to avoid overnight risks and fees. Most effective day trading methods include breakout trading and momentum trading. Breakout traders will identify key support and resistance levels and when the price breaks above or below these levels, traders will try to catch the price movement. Momentum traders follow assets that show strong trends and ride the momentum until signs of reversals.
Swing Trading: Capture Short-Term Trends
Swing traders use technical analysis and chart patterns to profit from price swings. In terms of scalping and short-term, swing traders can follow intraday price swings and hold positions for hours, avoiding overnight trading. Trend followers identify existing trends and try to capitalize on them. Swing traders will target price swings toward the main trend to increase their odds of success.
Tips for Successful Short-Term Trading
Scalping is a method where traders have limited time to act upon price movements. Risk management becomes most crucial when trying to deploy scalping methods. Using advanced charts, indicators, and real-time data helps traders make highly accurate decisions and avoid getting tricked into fakeouts. Another critical trait for all scalpers is superior discipline to stick to your trading strategy rules and never deviate. Emotional trading is a major risk for traders, and only discipline can counter it. Scalpers are continuous learners as well, they stay updated with the latest strategies and market news.
Common Mistakes to Avoid
Common mistakes to avoid in scalping include overtrading, news trading, and neglecting fees and commissions. Overtrading can happen if scalpers continue trading for the whole day and get tired. Without an alert mind, losses can happen quickly. Major news shakes markets, and scalpers can get caught in fast adverse movement and lose more money than they anticipated. So, avoiding news trading, unless the strategy is not a news trading strategy, is a good idea. Spreads, fees, and commissions can quickly eat up profits, and if scalpers are not careful they might lose money even if they win the majority of trades. High spreads and high commissions should be avoided at all costs when scalping.