Short-term and Long-term trading

  • Jun 23 2021
  • by
  • Analyst AZA
Short-term and  Long-term trading

Short-term VS Long-term trading on Forex

Effective trade in the form of good and stable earnings for a potential trader is not realistic without a thoroughly thought out and chosen trading strategy.

Trading by professionals does not involve spontaneous steps or rash actions, which are based on only emotional impulses: that's why entering the market, as well as getting out of it, should be taken seriously, with analysis and include reason, as the forex market does not encourage work on «lucky».

Starting to think about creating its tactics, developing its forex system, it is very important to determine in advance the time limits in which you plan to trade.

This is important, so the main task of trading in the international foreign exchange market is to obtain income by the player, based on a profitable difference in the exchange rate, but for a fixed period.

Forex traders hold different positions: some are impressed by the short-term trading option, applying minimum time intervals, while others choose minute or hour charts, or are supporters of medium-term trading, prefer long-term trading.

The medium-term trade is based on trading periods - intervals from one day to a week, and long-term trade is characterized by weekly or monthly intervals.

To achieve the most effective result in the forex market, we will analyze what is the difference between a short-term and a long-term trading option.

 The short-term variant of trade and its tactics

Short-term trading is considered the most profitable, but along with the potential for good earnings, there are also potentially high risks.

This is because trade within a day is rather complicated if you look at it from the point of view of price forecasting.

This trading tactic assumes an instant reaction: the trader is simply obliged to react lightly to the changes that affect the market, he must quickly make the right decisions.

Such a strategy requires a deep understanding of the exchange.

If you choose a short-term trading option, then be prepared for conducting technical market analysis using technical indicators in the forex market.

In addition, to minimize losses, a trader simply must be able to correctly apply for stop orders.

There are the following directions of short-term trade:

1) scalping;

This strategy is characterized by the closing of the deal, after reaching a small (several points) profit.

As a rule, trading takes place within a fairly fast time interval, from M1 to M30.

In the course of trading, the player commits a large number of transactions with a small result for each operation - a moderate income or loss: such a model can lead to very good results. So, every day a trader can conclude 100 or more trading operations, while it is impossible to miss the frequent execution of stop orders.

The disregarded orders of drawdown in trading can deprive the bread trader.

Scalping is considered a high-risk option for trading, but with the right approach, you can get a good profit.

2) intra-day trading is characterized by the fact that the purchase or sale of assets is carried out in one trading day (day).

This method is not very risky if you trade at 15-minute - 4-hour intervals: one day you can conclude 1-2 transactions.

With all its advantages, choosing a short-term trading option, one should not forget about the increased risks: market noise is quite pronounced - it hinders accurate and correct forecasting of the price for the day.

Also, do not forget that technical analysis can lose its effectiveness (in short time intervals) when important events (news that turns the exchange) exit.

Keep in mind that when choosing short-term trading, you must take special care of the details and constantly monitor the news that occurs on Forex.

The trader is important:

- to conduct trades in the direction of the main trend, and at the first signs, which testify to us about the rollback (correction) to affect the closing of the deal;

- use the rules of money management: do not open positions that exceed the level of 5% of the entire player's deposit;

Do not forget to put stop-loss;

-to apply the methods of those analyzes, such as horizontal levels or trend lines;


to determine the boundaries of profits and losses earlier, when these limits are reached, it is no longer possible to trade on that day.

The long-term variant of trading on Forex is characterized by trading on long timeframes (from a couple of days to a couple of years).

This type of trading on Forex can be called positional.

It would seem that such a trade option is not at all complicated: the deal is concluded, the player issues orders (making a profit and minimizing losses), and then watches orders to work.

But in reality, not everything is as easy as it seems at first glance, and this method implies a serious market analysis, before the conclusion of a trade operation.

It is important to assess the movement of the instrument (currency), to know and understand where it will seek, whether it will continue to move in the right direction for us.

Based on graphical analysis of currency movements, choosing a month or a week, the trader can quickly make predictions, and understand what the outcome will be.

The main drawback (in the opinion of critics) of such tactics is in SWAP: it places players on the rule of the size of the deposit.

In other words, with each unclosed position, the player pays the transfer for the next day.

That is, the size of deposit funds should be very impressive, in case of losses. But when the market moves in a direction that is advantageous for us, it is possible to obtain substantial earnings on this.

Do not forget about the methods of money management, and apply 1-3% of the deposit amount, and minimize the risks - set a stop-loss, be able to competently evaluate and make long-term forecasts.

As for the medium-term trading option, this is an intermediate method - the golden mean between short-term and long-term.

For this trading tactics, often use four-hour and one-day time intervals, and the duration of the transaction from one day to one week.

For such a trade option, you do not need too much of a deposit: $ 500-1000 is enough. Risks are lower than in short-term trading, but the number of trading operations is higher than for long-term trading.

Do not forget about such science as mani management and do not place more than 1-2% of the deposit in the transaction.

When choosing one of the above options for trading, focus not only on the size of its capital but also on the level of knowledge, the availability of practical and analytical experience, the degree of understanding of the market.

If you are very anxious to try short-term trading, do it with a virtual demo account.

Unambiguously, experts recommend starting with medium-term tactics: it is possible to understand the principle of the work of the market sufficiently, there is time for analysis and decision-making.

Since long-term trade requires not only impressive investments but also knowledge, experience, and a deep understanding of the market, endurance, and patience on the part of the player.

Successful and profitable trading!

Trading by professionals does not involve spontaneous steps or rash actions, which are based on only emotional impulses: that's why entering the market, as well as getting out of it, should be taken seriously, with analysis and include reason, as the forex market does not encourage work on "lucky."


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