Which varieties are most suitable for short-term trading? Beginner’s Guide by ATFX
Trading styles are roughly divided into three categories: long-term economic cycle, mid-term news, and short-term technology. Short-term technical schools can be subdivided into overnight short-term, intra-day short-term, and high-frequency trading. In theory, the shorter the trading cycle, the more ups and downs involved, and the greater the gains. Click here to learn how to become a trader.
A typical case is: Gann, the inventor of the Gann theory, operated 286 transactions in 25 trading days, of which only 22 losses were made, and the remaining 264 were profitable, with a winning rate of 92%, creating a legend of the era.
Of course, the risk and return are equal, and participation in more volatility is a higher return for people with strong technical analysis skills, but for those with weak technical analysis skills, or even radical novices, it means continuous accumulation. Transaction risks and rapidly increasing transaction costs.
There is no doubt that the varieties that are suitable for short-term trading must be highly volatile. Such volatility does not require a unilateral rise or unilateral decline, as long as the transaction cost can be covered. The cruel reality is that investment products develop in shocks 70% of the time, and most of the short-term trading orders are also completed in shocks.
Even if there is a large-scale unilateral trend, short-term traders will waste most of the market because of the limited holding time. The so-called "let profits run" by swing traders is not entirely applicable in short-term trading, because this concept will cause short-term traders to frequently stop losses in the volatile online trading market.
Establish the awareness of "small take profit" and avoid greed. You must know that there are many V-shaped reversals in the market. Most of the time, extending the holding cycle will only make you ride the roller coaster again and again.
The varieties with higher volatility in MT4 software are EURUSD, XAUUSD, WTI, which are also the short-term trading varieties most recommended by the author.
The reason is that the euro is the currency with the highest weight in the calculation of the US dollar index, accounting for 57.6%. It can be said that trading EURUSD is trading the US dollar index. The US dollar is a hegemonic currency, and the world's attention is focused on the economic development of the United States. Whether it is a popular event such as the U.S. election, or the Federal Reserve's interest rate decision, or even sub-data such as the non-agricultural employment report, there is a high degree of attention. Another reason is that EURUSD is the currency pair with the highest trading volume in the world, accounting for about 30% of the total trading volume of all currency pairs throughout the year.
The volume of transactions means that the variety is highly active, and the activeness is the volatility that short-term traders most value. Here can be a supplement. In the ranking of global currency pairs trading volume, EURUSD ranks first, the second is USDJPY, accounting for about 13%, and the third is GBPUSD, accounting for about 11%. The rest are AUDUSD (6%), USDCAD (5%), USDCHF (4%), NZDUSD (4%), EURJPY (3%), GBPJPY (3%), EURGBP (2%). When EURUSD trading opportunities are insufficient, short-term traders can choose USDJPY and GBPUSD as supplements. Especially USDJPY, which is far more active during the Asian trading hours than EURUSD and GBPUSD.
It is because gold is the world's core safe-haven asset. When facing an economic recession, when the stock markets of all countries are falling and currencies are depreciating, gold can be boosted by panic and rise sharply.
Moreover, gold is the most well-known commodity investment. The Ministry of Finance, the Central Bank, and the common people all know that gold is a precious metal. Whether it is a peaceful and prosperous age or world chaos, it is always right to reserve some gold. Secondly, the trading volume of gold is huge, which is the same as EURUSD.
Even in an environment where the macro news is light, the natural volatility of gold is very high. In fact, there are a large number of short-term traders who only operate gold varieties, and none of the other trading varieties is touched.
The advantage of the gold market over EURUSD is that the relevant data about gold is more transparent, and traders can find all the data they need on the World Gold Council. In the currency market, because of national policies, important information is often blocked or modified.
Because it complements gold trading. Gold is a counter-cyclical hedging product, while crude oil is a pro-cyclical value product. When the global economy continues to recover, the demand for crude oil has steadily picked up, and prices have risen.
In addition, the attention and trading volume of crude oil, like EURUSD and XAUUSD, are very high. Especially after experiencing three oil crises, its low position in the international market is irreplaceable.
Crude oil futures are the mainstream trading product. Since it is a futures, it means that it has an expiry date. The crude oil contract is only valid for one month, and after one month, it must be replaced with a new contract, which is also known as contracts for difference.
This kind of contract replacement makes long-term traders at a loss what to do, but it has little effect on short-term traders. From the perspective of the game, a large part of the funds lost by long-term investors participating in crude oil trading is absorbed by short-term traders. This is one of the reasons why crude oil short-term trading is logically optimistic.
Crude oil is also a bulk commodity, and the bulk commodity category has the same analysis idea, which is to observe the changes in inventory data: high inventory, oil prices are under downward pressure; inventory reduction, oil prices will be supported.