Short term trading can be quite profitable but a the same time, it can also be very risky. Short term trading usually lasts for only a few days and is characterized by quick thinking and pretty good intuitive skills aside from the essential requirement of excellent stock trading knowledge and analysis. Without these, traders may find it too stressful and risky to delve on short term trading.

Successful traders who practice short term trading have the knack to identify and discover attractive trade opportunities. They know when to buy and how long hold the stocks. Not only that, short term traders also have the ability to protect themselves from certain unforeseen events, and prevent one from doing damage to their position.

Spotting Opportunities

One of the fundamentals of short term trading is being able to spot potential short term trades when they are available. Doing so takes more than just watching the evening news and reading the business section of the papers and financial magazines.

By the time people hear about the opportunities from the media, it is usually old by trader standards. What traders look for are opportunities that most people have not yet known about.

Moving Averages

In spotting good short term trades, it may be good to look at the moving averages of stocks. It is the average price of a particular stock for a specific period of time. When watching the moving averages of stocks, traders usually look at a time frame ranging from 15,20,50,50,100 to 200 days.

The moving average can help give traders an overall idea of whether a particular stock is trending upward or downward. A potential stock for short term trading would be one with an increasing moving average that is sloping upwards.

Overall Cycles

Aside from the moving average, short term traders also observe overall cycles and patterns distinctive in the market. In general, trading in markets usually come in cycles. There are certain periods that the market enjoy gains and there are times when the averages remain unchanged.

That is why some traders look into certain months in the calendar when these cycles and patterns happen. Determining the patterns can be very useful in trying to know the best times to enter into short term trades.