Short Term CFD Trading Strategies

A short-term trading strategy seeks to capitalize on small price fluctuations in the market. The duration of these trades can range from just a few seconds or minutes to several days, depending on the strategy used. In contrast, long-term or position trading focuses on capturing larger trends, with positions held for months or even years.

Whether you're using a short-term or long-term approach, effective risk management is essential for trading success.

In short-term trading, there are three primary styles often used in CFD trading: scalping, day trading, and, in some cases, swing trading.

Scalping

Scalping is a short-term trading strategy where traders make numerous trades throughout a trading session, focusing on capturing small price movements. The goal is to earn frequent, small profits by entering and exiting trades quickly, often shortly after they become profitable.
Scalpers typically place many trades in a single session, using technical analysis to generate trade signals. It’s also important to monitor the economic calendar, as news events can significantly impact scalping trades.

A common scalping technique involves using a combination of moving averages and the stochastic oscillator on a 5-minute (M5) chart, applicable to most major currency pairs. This approach uses a 200-period exponential moving average (EMA) to gauge market trends. When the price is below the 200-period EMA, scalpers look for sell opportunities, while they seek buy opportunities when the price is above the EMA.

Day Trading

Day trading usually involves closing out positions before the end of the trading day, though some traders may hold positions overnight if market conditions are favorable.
Like scalpers, day traders rely heavily on technical analysis to make trading decisions and also consider the day’s economic news.

Day traders generally use longer timeframes compared to scalpers. Common choices include the 15-minute (M15), 30-minute (M30), and 1-hour (H1) charts.

While there are numerous day trading strategies, those based on straightforward price action often yield good results over the long term.

Swing Trading

Swing Trading focuses on exploiting gains in short-term swings. A swing trader is concerned with capturing price movements between defined highs and lows.

Swing Trading positions are usually active between a few days to a couple of weeks. The difference between swing trading and day trading is time and, for some, the approach. Swing traders tend to lean towards the H1 timeframes and higher; traders in this category may also include fundamental analysis in their trading approach.

Trend trading is a popular swing trading style, with the aim of capturing a portion of the trend.

Conclusion:

A short-term trend following strategy is based on the expectation that an asset’s price will continue in its headed direction and will not reverse for the time that you have the position open for. Traders would typically look to buy an asset (go long) if it is seeing an upward trend, or sell the asset (go short) if it is seeing a downward trend.

You can trade a wide range of markets in the short term, and the flexibility of this trading style means you can hold positions for anywhere from seconds to weeks. The market's opening hours don't necessarily affect your approach, allowing you to choose based on your personal preferences and interests.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.