Let’s start with what all trading is about: buying low and selling high – or in the case of short trading – the reverse – sell high and buy back low.

Generally speaking, with respect to time, all trading is based on the same principle: Find a time to enter the trade when the expected oscillation is moving in your favor.

 

Oscillations occur in all time frames –the shorter the time frame, generally, the shorter the oscillations.

 

The key to profitable trading is to find an oscillation that is just beginning (or is about to do so) and ride it to its maximum value.

 

I prefer short term trading in the conditions in the markets today because of the relative nervousness of market participants. Like a herd of cattle, a small clap of thunder and the markets fly off in one direction or another – sometimes in the opposite direction one might logically expect, based on the event causing the volatility.

And volatility is like a sharp knife – great if you are doing the cutting – not so great if it is cutting you.

 

For short term trading the FOREX markets, I use three intra-day charts for any currency pair I am trading. They are constructed by using tick bars: the first one is set to display 10 to 12 bars per day. The second chart is set to display ten times as many bars per day and the third chart displays ten times as many bars per day as the second.

 

So I am constant looking at three time different frames of intra-day data. I prefer to construct my trade on the first chart, or in very heavily traded markets, the second chart. The third chart is seldom, if ever used in constructing a trade, but is used to time entry and exits.

 

The ideal trade entry is when all three charts are at the beginning of an oscillation. But that doesn’t happen often, so I try to get the best entry possible based on chart one, then try to time that with the other two charts moving in the direction of my trade. My Relative Momentum Indicator (RMI) is used to make the determination of the most likely direction of the next movement and monitor its progress.

 

All trading is about playing the oscillation – but for short term trading, it is very critical to select an oscillation that will likely provide a profit movement of at least three times your anticipated risk. That is where my horizontal lines representing support/resistance come into play. I use my RMI to locate those lines, and they are almost always good for a week of trading. The RMI is one indicator that I could not afford to be without when trading.

 

If you have never tried it, and you want to improve your trading skills, you should give it a try – a free trial is available from TradeStation – and it only costs $8 per month to use – but only in TradeStation – but the TradeStation trading platform is now free to new accounts. You might want to consider an account with TradeStation – without a doubt the best charting platform available anywhere.

 

 

 

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