Investor Jim,
What is short term trading?
Tim

Tim,
Short term trading is a trading strategy employed by traders in the stock market or foreign exchange market. It’s called short term trading because the duration between the entrance and exit of a trader in a trade usually lasts from a day to a couple of weeks. Two types of short term trading is swing trading and trend following.

Swing trading is a trading strategy where a trader buys and sells a trade item near its opposite swing cycle. In trading, prices of traded items fluctuate according to the movement of the market. Prices swing from a high to a low then to a new high to a new low. This cycle is what swing trading is banking on. One enters the market when the price of the traded item is at its lowest then hoping for the price to rise up to a new high where one can sell the traded item and earn profit. Swing trades can last from a day to a couple of weeks.

Trend following is a trading or investment strategy that involves taking advantage of market movements and market trends. Traded items sometimes follow a positive trend following a positive event in the market or a negative event that affects other traded items and inversely affects the traded items one trades. Traders that employ this strategy don’t usually predict the movement of the market but rather looks for indicators of an ongoing trend in the market and rides it until it turns.

In forex or foreign exchange trading markets where trading of various currencies from around the world happens, swing trading and trend following can be commonly seen. The foreign exchange market is also open 24 hours a day for five straight days. The fluidity of the market makes it easy for traders to trade currencies. When a forex trader is in a trade and information that another currency is on the rise and that prospect seems better than the one the trader is in, the forex trader can easily exchange the currency one has to enter into the new prospect one has found. Not like any other traded items where one item cannot be easily exchanged with another different item, foreign currency can be directly traded to another currency with little difficulty.

Although most currencies don’t really follow any seasonal trends, some business cycles do affect how the currencies move. Like when Christmas is near, some countries that export products related to the Christmas season will most likely experience a rise in the price of the currency of their country. Or in times of vacation, countries with widely popular vacation spots that experiences high amount of tourists from around the world can also have some effect in the currency of that country.

To be a successful forex trader, one must be aware of indicators on what general direction a certain currency will go. Also, one must get familiar with the factors that may affect the currency of the country.

Investor Jim