Short term trading strategies using technical analysis

Introduction

When Investing in financial instruments, Investors can take two simple strategies. One is long term
perspective investment and the other is short term periods tactical investment. Usually, long term
investment is used as strategic asset allocation that focus on stable management and adequate
risk diversification. On the other hand, short term strategy is more flexible strategy depending on
market status to make further gaining profit using many kinds of trading strategies.

These days, the importance of short-term strategy is getting more appealing to investors. When
investors are considering short-term investment, they usually focus on the price of chart and use
technical analysis to take profits. Fundamental analysis needs time consuming endeavor. That’s
why many traders pond of short term trading strategy.

Basic information of Price Chart

1. Candle Stick

Candle stick shows the current price status from starting point to finishing point. Also, the color
of Candle stick represents the direction of the price for a specific period. Using the Candle charts,
Investors can understand overall price movement, volatility of the asset class and the psychology
of the market participant.

2. Volume

Volume of trade is the total quantity of shares or contracts traded for a specified security. It can
be measured on any type of security traded during a trading day. Volume of trade or trade
volume is measured on stocks, bonds, options contracts, futures contracts and all types of
commodities.

3. Moving average line and Trends pattern

Moving averages are one of the most commonly used technical indicators in stock, futures and
forex trading. Market analysts and traders use moving averages to help identify trends in price
fluctuations, smoothing out the noise and short-lived spikes (from news and earnings
announcements, for example) for individual securities or indexes.

4. Support and Resistance level

Technical analysts use support and resistance levels to identify price points on a chart where the
probabilities favor a pause or reversal of a prevailing trend. Support occurs where a downtrend is
expected to pause due to a concentration of demand. Resistance occurs where an uptrend is
expected to pause temporarily, due to a concentration of supply.

5. Indicators
Indicators are statistics used to measure current conditions as well as to forecast financial or
economic trends. Economic indicators are statistical metrics used to measure the growth or
contraction of the economy as a whole or sectors within the economy. In fundamental analysis,
economic indicators that quantify current economic and industry conditions are used to provide
insight into the future profitability potential of public companies.

Technical indicators are used extensively in technical analysis to predict changes in stock trends or
price patterns in any traded asset.

6. Market price factors depending on the specific asset

Each specific asset has on their existing price factors. For example, oil prices are directly affected
by the production forecast or expected overall demand. For the Gold, overall market uncertainties
directly affect the price of Gold. Corporate stock depends on the operating profit and corporate
debt is affected by the credit risk.