Basic secrets of short-term trading. Short Term Forex Trading Strategies Forex Short Term Trading

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As soon as you start trading Forex, you will be introduced to a world full of economic events, political speeches, indicators, oscillators and other details that you have not encountered before.

Short-term currency trading is definitely interesting and educational, however, many traders fail to make money this way. In order to become a profitable trader, not only in the Forex market, but in any other market, you must be disciplined and constantly develop your own strategy.

Of course, you can take the easier route by copying other people's trades, signals, or strategies, but you won't gain any knowledge that way.

When it comes to choosing a strategy, most traders usually choose between position and day trading approaches. The last type of trader uses short-term Forex trading to catch market movements during the day. The main idea behind day trading is to take advantage of intraday volatility while avoiding paying for .

In fact, most individual Forex traders are day traders. As a day trader, you will earn large amounts of money with a greater frequency of transactions.

The amount of profit from the transaction in the case of day traders is not as high as in the case of position traders, but at the same time, the number of transactions also differs significantly. Let's take a closer look at the concept of short-term Forex trading, the most and tips for trading on short periods.

What is short term Forex trading?

Roughly speaking, short-term trading is associated with holding a position for no longer than one day. Sometimes, short-term trading can be carried out for several days, but not more than a week. Unlike trades that last from a week to a month and are called medium-term trades. Longer transactions are called positional.

The mechanism of short-term Forex is quite simple. The main idea is to use a strategy that will allow you to receive a significant number of entry signals on M1-M30 timeframes. Typically, short-term trading occurs during the most volatile periods.

These periods will vary depending on the trading instrument you choose, but nevertheless, the greatest volatility is observed during the London sessions.

The main thing to remember is that short-term trades are usually driven by technical analysis. However, you should also pay attention to fundamental events. Be that as it may, the most important point is to develop your own short-term Forex trading strategy. Let's look at the main trading strategies for short time periods.

Forex strategies for short timeframes

Let's take a look at the main strategies. We won't go into the details of the indicators, time frames or settings used - instead, we'll explain the main types of short-term Forex strategies, leaving the process of exploring the settings to you.

Before you start trading on a real Forex account, it is very important to gain experience by practicing on a demo account. So, what strategies can be applied?

Forex scalping

This is the most widely used short-term currency trading strategy by day traders. It is based on acquiring as many points from a trade as possible and trying to isolate as many trading opportunities as possible.

At the end of the day, you are looking for a trade involving a significant amount of money, setting your Stop Loss low and setting your Take Profit high. It is usually carried out on time frames from M1 to M5, since you need to get rid of open positions fairly quickly. On average, following this strategy, you will lose about 2-5 points and earn about 5-9.

There are two things to keep in mind when doing Forex scalping. First, you should find a broker who will provide you with the best execution of any type of short-term Forex strategy.

This means that your broker should definitely execute STP or ECN, as you will not be able to effectively scalp with the intervention of the dealing department. Luckily, Admiral Markets can offer you Instant and Market execution account types.

Secondly, immediately after the execution, the spread is of great importance for scalping.

How to trade Forex on short timeframes

When it comes to short-term trading, you need discipline more than ever.

A common mistake among beginners is to try to trade using short-term trading strategies in the foreign exchange market in order to avoid placing Stop Loss orders or to modify them simply because they do not want to close the position. This behavior is unacceptable and should be avoided.

Keep in mind that scalping may not be the best short term Forex trading strategy for you as it requires a lot of time and attention throughout the day.

Forex scalping is not an intermediate activity. However, it is very informative and educational as it allows you to make a decent amount of trades in a short amount of time.

Thus, you learn the mechanisms of Forex trading much faster, and also test the level of your discipline.

The most attractive way of trading for most traders, especially for beginners, has always been considered short-term Forex trading. After all, it is with its help that there is a great opportunity to quickly get the expected profit, and this process can take from several minutes to a couple of hours inclusive. However, along with the simplicity and speed of obtaining income, short-term trading is also associated with a very high degree of risk. Therefore, short-term transactions are best carried out by professional traders who are well versed in the nuances of the Forex market.

Short-term trading transactions (or in other words, scalping) on ​​Forex mean trading within a day (one business day). Moreover, it is on these short intervals that it is very easy to track price movements using the maximum leverage. However, for the competent implementation of scalping, a trader needs to adhere to several main rules:

1. It is necessary to carefully monitor the moving average on the chart in order to be able to follow how downward or upward price fluctuations develop in the foreign exchange market.

2. The trader also needs to constantly monitor the cycles, which can help him determine the ideal moment to open or close current positions.

3. You always need to feel where exactly the trend will go in the future. That is, when the general trend begins to reverse against the trader, it is necessary to close positions, since the chance to make a profitable deal is significantly reduced.

If we talk about the advantages of short-term trading, then we should highlight the main positions for the trader:

1. In view of the smaller time frames on the same price ranges, the trader has the opportunity to earn more and faster.

2. Minimum expenses on spreads.

3. You can open positions on both short and longer positions.

4. Brokerage companies charge small commissions for short-term trades.

5. The ability to place small stop orders, which allows you to trade with a minimum deposit.

6. A trader can expect to receive more significant leverage.

7. There is a high volatility of the currency, which allows the trader to profit to the maximum.

However, short-term trading has its own certain disadvantages, which are as follows:

1. A very high psychological burden on a trader, especially if he trades without a Forex advisor and a well-defined strategy.

2. Very often there are delays in the execution of orders.

3. There is a high degree of competition among traders in the market.

4. During short-term trades, a trader is required to be constantly present on the market.

5. A high degree of risk, which lies in the fact that the trader must always take into account the movement of the market and quickly respond to it.

Thus, short-term trading is a specific strategy that allows a trader to receive a small but more frequent profit by quickly opening/closing trading positions. In addition, when carrying out short-term trading, fundamental analysis is usually not taken into account, so the trader always needs to anticipate the fact that the price can very unexpectedly change its direction and go in the opposite direction. Such trading requires the trader to have a good knowledge of the Forex market and all the processes that take place there, as well as increased concentration and stable psychological preparation.

Short-term trading strategies are a variant of strategies that involve generating income by concluding short-term transactions. The peculiarity of this system lies in the fact that although transactions are of a short duration, there are many of them.

The duration of one open position on Forex depends specifically on the strategy chosen by the trader (from a few seconds to a day). It should be said that, according to its specificity, short-term strategies are very demanding on the ratio of profitable and non-profitable trades.

So let's take a look 5 effective short-term strategies, as well as their parameters.

Short-term strategy based on MACD divergence in Forex trading

This strategy, with MACD trend divergence, is a trading system that is based directly on the divergence of the value line, which is actually called divergence, as well as the lines of the standard MACD adviser.

This trading strategy is truly universal, as it can be applied to any trading instrument. In addition, this trading system can be used on all timeframes.

It allows you to very effectively find kickbacks and. But she also has a drawback. Unfortunately, this system does not give exact points for entering the foreign exchange market. Since we are talking about a short-term strategy on long-term timeframes, the signals are quite rare.

However, when using long-term systems, they can be used as effective additional signals. Experts recommend within.

Short-term Doske scalping strategy actively used in Forex trading

This is another effective short-term strategy, which is intended primarily for trading with currencies such as:

• JPY/USD
• GBP/USD;
• USD/CHF

Video: Board scalping strategy

At the same time, experts recommend choosing the H1 time interval as part of trading using this strategy. This trading system was created on the basis of the readings of two well-known technical indicators. We are talking about EMA and QQE algorithms.

EMA trading indicator parameters:

1. Method of Moving Average — Exponential. In this case, it is better to use the period, 11, 3. (EMA, red);

2. Moving Average method - Exponential. It is characterized by a period: 55. (EMA, pink);

3. Method Moving Average - Exponential. Here it is better to use the period 275 (EMA, yellow).

Parameters of the QQE trading indicator:

• QQE period: 6;
• QQE period: 60.

When opening long trades, that is, when buying a trading instrument, all red EMA values ​​are above the pink EMA. The solid curve of the QQE technical indicator, with a frequency of 6, must cross the set level with a value of fifty.

A signal indicating that it is time to exit a trade is a situation in which the solid line of the technical advisor, whose name is QQE, crosses the broken line in the direction set downwards with a period of sixty.

When opening short trades, that is, when selling a trading instrument, all EMA values ​​should be located under the pink EMA. The current line of this Expert Advisor in this case with a period of six should cross the level of fifty.

A signal indicating that it is time to exit a short trade is the situation in which the QQE adviser line crosses the dashed line with a period of sixty upwards.

When conducting aggressive trading, the readings of the Moving Average Expert Advisor. Naturally, yellow color with a frequency of 275 is not taken into account. When trading in a conservative manner, experts do not recommend long trades when the current price is below the yellow EMA. It is better to open short trades when the current value of the currency is above the yellow EMA.

Short-term Forex strategy trading on PSAR and MACD

Working with a strategy on PSAR with MACD also refers to short-term trading systems that are built on two technical indicators. It works on the basis of technical indicators with standard parameters and MACD-combo with parameters: twelve twenty-six, nine.

The platform on PSAR and MACD allows you to trade on all pairs. At the same time, experts recommend a timeframe of thirty minutes. The H1 timeframe may also be suitable.

When using this strategy, positions should be opened in the following cases. First of all, when the signals from the above technical indicators match. In this case, the line of our MACD-combo should cross and pass the Parabolik SAR points. In this case, the signal should first come from our Parabolik SAR, and only then from the MACD-combo. In rare cases, this can happen at the same time. The position is not opened when the MACD-combo technical indicator gives a signal first.

Signals are considered relevant if they coincide within the same time interval from the first to the third bar inclusive. The warrant must relate to each other as 2:1.

A signal to buy a currency is the case when the points of the PARABOLIC SAR adviser cross the chart down. On the MACD-combo algorithm, the blue line crosses the red line within the time interval from the first to the third ball inclusive.

The situation is somewhat more complicated when it comes to selling. A signal for such an action may be the case when the points of the PARABOLIC SAR adviser cross the currency chart upwards.

Recall that this could be chart of absolutely any quote. And here, in the MACD_combo indicator, the blue line should cross the red line down. As well as when entering the purchase of a currency, the intersection must occur within the time period from the first to the third bar inclusive.

For the most correct entry, experts recommend finding a place that will become the intersection of the MACD-combo lines.

Short-term strategy in Forex trading - Outsider method

The fourth short-term strategy on our list is the Outsider method, which perfectly fulfills its purpose as part of working with the GBP/USD pair.

Video: Outsider method

This trading system was created on the basis of the readings of one standard indicator, which is called the Moving Average. As you already understood, this tool is based on . At the same time, the recommended timeframe is M15. When concluding short-term deals, the parameters of the Moving Average Expert Advisor should be as follows, the EMA method: Exponential, with a period of nine.

A signal for their opening can be the case when the current bar does not cross the moving average. Ideally, it should be located as close to it as possible.

It is important that the closing price of the current bar is lower than the low of the previous bar. A deal to sell a currency is usually opened at the opening of a new bar. A Stop Loss order must be placed at the high of the candle of the previous trade.

It is interesting to note that long deals can also be made with this tool. A signal for their opening can be a case when the current bar cannot cross. He must also not touch the middle EA, which is called . The closing price of the current bar must be higher than the previous one, and a buy trade is opened at the opening of the next bar. A stop-loss order is placed at the low of the candlestick of the previous trade.

Strategy based on EMA + Laguerre + CCI for short-term trading

Rounding out our list of the best short-term strategies is a trading system called EMA + Laguerre + . Actually, already from its name, you can understand that this tactic works on the basis of three effective indicators.

This system is designed to work with a single EUR/USD pair. As already mentioned, in terms of its gradation of work, it is another short-term version, its working working timeframe is M5. Before starting work with this strategy, experts recommend always checking the settings of all three indicators.

To register a profit, an order, the name of which is Take Profit, should be placed at a distance of ten to eleven. Otherwise . Regarding the stop-loss order, which, as we know, limits the losses of traders, should also be set at a distance of nine to twelve points.

Experts advise closing short trades or simply rearranging the STOP LOSS order closer to the cost. But this is only possible if the Laguerre indicator gives a value less than 0.1.

Short term strategy for beginners

As a rule, all traders can be conditionally divided into two large groups: day traders (trading intraday) and long-term traders (concluding up to 10 transactions per year). Almost all beginners do not start with short-term trading, as they want to constantly be in the market, concluding from 100 to 300 transactions per month, or even more. Later, many of them begin to realize that sometimes it is better to skip a few dubious signals and choose one, but of better quality, which can bring more profit. Such traders are committed to long-term trading. They can wait long enough for the right moment to enter the market to keep the trade open for weeks or even months. Other traders become proficient in short-term trading when they realize that statistics are on their side, and out of several hundred closed trades, the number of profitable ones prevails over losing ones. Let's look at the main differences between short-term and long-term trading, and how to succeed in both areas of trading.

set profit and loss limits for the day, after which you no longer trade that day.

A good help for an intraday trader will be the book by practicing trader Larry Williams "Long-term secrets of short-term trading", in which the author shares his experience in promoting a deposit from $10,000 to $1 million in a year. In his book, Larry Williams talks about the basic principles of short-term trading, the three cycles of time and price, optimal entry and exit points, and much more.

Download free book Larry Williams "Long-term secrets of short-term trading"

Medium term trading

Medium-term trading is a cross between short-term and long-term trading. More than half of all players in the foreign exchange market are medium-term traders. Trading is usually carried out on the H4 and D1 timeframes, and the duration of the transaction is from one day to several weeks. A good example of such trading is the strategy. For medium-term traders, there is no need for large capital, it is enough to have at least 500-1000 dollars on the account, while the risk is reduced compared to short-term trading and the number of transactions increases to 30 per month compared to long-term trading. Trading on medium-term strategies, you can increase the initial capital for several years, and then, if desired, combine it with long-term trading. The main thing is to observe money management and do not risk more than 1-2% of the deposit in one transaction. Profitable trading to you!

The term "short-term trading" can be understood in different ways, but in Forex it is customary to consider transactions that last less than 1 day as short-term. Moreover, short-term transactions, as a rule, fit into the framework of one trading session (Asian, European or American), i.e. about 6-8 hours. An even narrower understanding of short-term trading is transactions within 5 minutes to 4 hours.

The main advantage of short-term trading is that there is no risk when you are out of the market. By trading twice a day for several hours, the trader almost always keeps his capital safe, because the rest of the time he does not make any transactions. Moreover, during the "downtime" he does not need to be at the computer and follow the charts. The disadvantage of short-term trading is that a trader is sometimes afraid of missing out on a profitable opportunity and, against this background, acts impulsively or in the absence of sufficient grounds for a transaction.

Most short-term traders focus on the various chart patterns and candlesticks rather than the overall trend. Some traders claim that trend following interferes with their own strategy, while others, on the contrary, follow the trend because they consider such tactics less risky. In fact, there is always a risk, because in addition to the trend, there is also a correction; and yet, in the long run, focusing on the main trend may well be the right move.

The most famous short-term trading strategy is described by Toby Krable in the book Intraday trading using short-term price patterns and opening range breakouts written in 1990. The print version of the book is not currently available, and the digital version costs $950 (in the old days, a printed copy of this book cost $3,000). A breakout of opening ranges refers to a situation where a buy order should be placed under the simultaneous occurrence of three circumstances:

• there is a gap between the close and the open;
• after the opening bar, an absorption or doji appears, which signals a strong change in sentiment;
• the opening range has narrowed over the last 3-10 days.

Initially, the concept of an opening range was used in the stock market, where there is a clear line between the close and the open of the market. There is no such clear barrier in Forex: opening and closing can occur at any time within 1-2 hours. Formally, the closing takes place in New York at 0:59 Moscow time, and it is at this time that the data servers are guided, but in fact the market closes earlier. All this does not mean that the Forex opening range breakout strategy is ineffective, there are just very few gaps in the currency market. The real closing occurs only in New York on Friday evening, and the opening, respectively, on Sunday afternoon, although sometimes gaps appear when switching sessions from Asian to European. But the point is not even that there are few gaps, but that when they appear, it can mean anything, and not just what Krable described in his book.

Also in short-term trading, the names of Linda Raschke and Larry Connors, the authors of the book "Market Secrets". The book was published in 1996, its current reprint is dated 2016. In their work, the authors describe various strategies with very original names, but its main value lies in price patterns and patterns and not always complex. So, for example, one of Raschke's rules says: buy new lows and sell highs, and this rule works quite well on a 4-hour chart, especially if you draw classic horizontal lines on the charts at old lows and highs and wait for a reversal at a new one. price approaching them.

Another short-term trading strategy is described in the book Trade what you see: how to profit from shape recognition. The book was written by Larry Pesavento and Leslie Juflas quite recently, in 2007, and its essence is built around the famous figure ABCD, described by Gartley in 1936. Whatever you think or hear about Fibonacci numbers, the fact that on short-term Forex charts, retracement at 50% and 62% levels occurs much more often than on, for example, daily charts, is undeniable.

Below is the hourly chart of the EUR/USD pair. Here, we first see an upward movement, and then a pullback to a level just above 61.8%. Below the price does not want to fall, respectively, if there is no reason to sell, you have to buy. The first opportunity to buy appears when the price approaches the 50% level (first circle), the second occurs when the price exceeds the previous high (second circle), the third - when a new high is conquered (red horizontal line). In this case, there is also a somewhat unfortunate moment in the form of a strong correction between the two circled areas, and this moment reminds us that there are no ideal figures on the chart, and also that the figure often tells you when to buy, but extremely rare - when to sell. It is also worth adding that it is quite difficult to use a trailing stop loss on the hourly chart, so it makes sense to set a regular stop loss and take profit.

Opportunities for a buy trade based on Fibonacci levels and breakouts of highs

On the 4-hour chart for the same period, one could act differently. We apply the Raschke rule (“buy the lows, sell the highs”) and get a profitable result without getting nervous.