Short-Term Trading

Short-term trading is a trading strategy where positions are opened and closed in a short timeframe, usually within days or weeks, sometimes even shorter. Short-term trading is popular among retail and institutional traders looking to profit from short-term price movements and trends.

short term trading

Understanding Short-term Trading

Institutional and retail traders seeking to generate profits from slight price changes and trends are usually the ones that opt for short-term trading. On the other hand, small traders are usually not recommended to practice short-term trading.

In contrast to conventional trading strategies, short-term trading typically involves speculation. Because of the market's volatility, short-term traders are more prone to risk and unpredicted market conditions. The prices of stocks can be significantly impacted by a wide range of factors throughout short periods. Reports, firm news, and clients' attitudes all have the potential to positively or negatively impact the direction of stock prices.

If traders carefully watch the trends of stocks, this can help them decide whether to purchase or sell it shortly. Stocks rising upward over 1-2 days may present a potential for generating profits, while stocks trending downward may present an excellent chance to sell them short. 

Traders are generally advised to purchase stocks soon after the highest chart bar while looking at their chart patterns within a short period. After that, placing trailing stop orders would be the best option, allowing gains to grow and reduce losses. 

  • Note: Mondays have been the lowest trading day in the market, providing an opportunity for stock sales. Additionally, from 1950 to the present, the months of November-April have seen the majority of gains in the market. These patterns and averages can be used by traders to maximize profits. 

A Word of Caution

While trading in the short term can be quite profitable, it can result in losses for some traders. Short-term trading can range from some minutes to a few weeks. So, traders must comprehend the potential risks and benefits of this type of trading if they want to use this approach successfully. 

Traders have to protect themselves against the risks of short-term trading, as well as seeing profitable short-term opportunities. The success of this type of trading requires an understanding and mastery of several fundamental concepts. Thus, learning the important basics of short-term trading can save traders from any potential losses and help them generate profits simultaneously. 

About the author

Ziga Breznik is the owner and head of research at – he is an active investor in the forex, crypto and stock markets – he has seen trading platforms disappear along with his investments – especially during the “crypto boom”. Ziga learned the hard way that finding a reputable and trustworthy online brokerage is key to long-term success in the financial markets. He founded as a platform where he shares his research with one goal in mind: to provide unbiased and trustworthy online brokers reviews.