How to Get Started with Short Term Trading: A Beginner's Guide

Short term trading, also known as day trading or swing trading, is a popular strategy among traders looking to make quick profits by taking advantage of short-term market fluctuations. While it can be a lucrative endeavor, it is also highly risky and requires a solid understanding of the financial markets, technical analysis, and risk management.

In this comprehensive guide, we will walk you through the essential steps to get started with short term trading. From understanding the basics of trading to developing a trading plan, we will cover everything you need to know to become a successful short term trader.

Understanding the Basics of Trading

Before diving into short term trading, it's important to have a solid understanding of the basics of trading. Here are some key concepts you need to know:

Stock Market

The stock market is a marketplace where individuals and institutions can buy and sell shares of publicly traded companies. It is the primary market for trading stocks, bonds, and other securities.

Types of Traders

There are several types of traders in the market, including day traders, swing traders, and long-term investors. Day traders aim to profit from short-term price movements, while swing traders hold positions for a few days to weeks. Long-term investors, on the other hand, hold positions for months to years.

Technical Analysis

Technical analysis is a method of analyzing financial markets by studying historical price and volume data. Traders use various technical indicators and chart patterns to identify potential trading opportunities.

Fundamental Analysis

Fundamental analysis involves evaluating a company's financials, industry trends, and other factors to determine its intrinsic value. Traders who use fundamental analysis rely on information such as earnings reports, economic news, and geopolitical events to make trading decisions.

Setting Up Your Trading Account

Once you have a solid understanding of the basics, the next step is to set up a trading account. Here are some key points to consider:

Choosing a Brokerage

A brokerage is a company that facilitates the buying and selling of financial securities on behalf of its clients. When choosing a brokerage, consider factors such as fees, trading platform, research tools, and customer support. Some popular online brokerages include TD Ameritrade, E*TRADE, and Interactive Brokers.

Opening an Account

To open a trading account, you will need to provide personal information, such as your name, address, and social security number. You may also be required to provide proof of identification and residency. Once your account is set up, you can deposit funds to start trading.

Funding Your Account

Before you can start trading, you need to fund your trading account. This can be done by transferring funds from your bank account or by depositing a check or wire transfer. Most brokerages offer multiple funding options to accommodate different preferences.

Developing a Trading Plan

A trading plan is a written set of rules and guidelines that outline your trading strategy and risk management approach. It is essential to have a well-defined trading plan to stay disciplined and minimize emotional decision-making. Here are some key components to consider when developing your trading plan:

Trading Goals

Define your short term trading goals. Are you looking to generate income, build wealth, or both? Set realistic and achievable goals that align with your risk tolerance and financial objectives.

Trading Strategy

Decide on a trading strategy that suits your trading style and risk tolerance. This can include technical analysis, fundamental analysis, or a combination of both. Experiment with different strategies and refine them based on your trading results.

Risk Management

Implement risk management measures to protect your capital. This can include setting stop-loss orders, using proper position sizing techniques, and diversifying your trades. It is essential to limit your risk exposure and not trade with money you cannot afford to lose.

Trading Journal

Keep a trading journal to track your trades and analyze your performance. Record details such as entry and exit points, reasons for entering the trade, and lessons learned. Regularly review your journal to identify patterns and areas for improvement.

Learning Technical Analysis

Technical analysis is an essential skill for short term traders. It involves studying historical price and volume data to forecast future price movements. Here are some key technical analysis concepts to learn:

Candlestick Patterns

Candlestick patterns are graphical representations of price movements. They can provide valuable insights into market sentiment and potential reversals or continuations. Some common candlestick patterns include doji, hammer, and engulfing patterns.

Support and Resistance

Support and resistance levels are areas where the price has historically reversed or stalled. Traders use these levels to identify potential entry and exit points. Support is a level below the current price where buying pressure tends to outweigh selling pressure, while resistance is a level above the current price where selling pressure tends to outweigh buying pressure.

Moving Averages

Moving averages are widely used technical indicators that smooth out price data to identify trends. The two most common types of moving averages are the simple moving average (SMA) and the exponential moving average (EMA). Traders use moving averages to identify trend direction and potential areas of support and resistance.

Relative Strength Index

The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. It ranges from 0 to 100 and is used to identify overbought or oversold conditions. A reading above 70 indicates overbought conditions, while a reading below 30 indicates oversold conditions.

Executing Your Trades

Once you have developed your trading plan and learned the basics of technical analysis, it's time to execute your trades. Here are some key points to keep in mind:

Entry and Exit Points

Identify clear entry and exit points based on your trading strategy and technical analysis. Stick to your plan and avoid making impulsive decisions based on emotions. Define your risk-reward ratio and make sure it aligns with your risk management rules.

Order Types

There are several order types you can use to execute your trades. The most common ones include market orders, limit orders, and stop orders. A market order is executed at the current market price, while a limit order is executed at a specified price or better. A stop order is triggered when the price reaches a specific level, helping you limit potential losses.

Monitoring Your Trades

Monitor your trades closely to assess their performance. Keep an eye on market conditions, news events, and technical indicators that may impact your trades. Consider using stop-loss orders to automatically exit a trade if it goes against you.

Managing Your Emotions

Managing your emotions is crucial for successful short term trading. Here are some tips to help you stay calm and focused:

Stick to Your Plan

Follow your trading plan and avoid deviating from it based on emotions. Emotions such as fear and greed can cloud your judgment and lead to impulsive decisions. Trust your analysis and stick to your predefined rules.

Practice Patience

Short term trading can be fast-paced, but it's important to remain patient and wait for the right opportunities. Avoid chasing trades or entering positions out of boredom. Wait for clear signals that align with your trading strategy.

Control Risk

Risk management is key to preserving your capital and staying in the game. Set strict stop-loss orders and avoid risking too much on a single trade. By limiting your risk exposure, you can control your emotions and make rational trading decisions.


Short term trading can be an exciting and potentially profitable venture, but it requires extensive knowledge and discipline. By understanding the basics of trading, setting up a trading account, developing a trading plan, and learning technical analysis, you can increase your chances of success. Remember to manage your emotions and constantly evaluate your trading performance. With practice and perseverance, you can become a confident and profitable short term trader.


  • 1. Is short term trading suitable for beginners?

    Short term trading can be challenging for beginners due to the need for quick decision-making and the potential for higher risk. It is recommended for beginners to start with a solid understanding of the basics and to practice with a virtual trading account before committing real money.

  • 2. How much capital do I need to start short term trading?

    The amount of capital needed to start short term trading varies depending on your trading goals and risk tolerance. It is generally recommended to start with a sufficient amount of capital to comfortably absorb potential losses and meet the minimum account requirements set by your chosen brokerage.

  • 3. What are the risks involved in short term trading?

    Short term trading carries significant risks due to the potential for rapid price fluctuations. It is possible to experience substantial losses if trades move against your expectations. It is important to implement proper risk management strategies and only trade with an amount of money that you can afford to lose.

  • 4. How can I improve my trading skills?

    Improving your trading skills requires continuous learning and practice. Consider reading books, attending webinars, and following experienced traders to learn new strategies and gain insights. Additionally, regular self-reflection and review of your trading performance can help identify areas for improvement.

  • 5. Are there any shortcuts to success in short term trading?

    There are no shortcuts to success in short term trading. It requires dedication, discipline, and continuous learning. Be wary of promises of quick and easy profits, as they are often associated with scams and unrealistic expectations.

19 October 2023
Written by John Roche