Term Forex Trading Long vs. Short
Forex traders tend to have different perspectives about term Forex trading. Some lean toward the get in, make money and get out, whilst others favour a more long term growth. There is no question that longer term trading is deemed by the majority to be more advantageous as opposed to short term trading. However, there are also a percentage of investors who enjoy and are extremely successful at trading in the short term. But whichever type of Forex term trading you favour, there are advantages and disadvantages to both.
Forex Brokers will generally try and guide new investors toward long term type of trading on the premise that is more easily learnt, can be very profitable, and there is more control over the risks.
Short Term Trading
Short term trades are classified as less than a seven day holding period. The most common usage of short term trading is by scalpers, day traders, and some swing traders, who can hold a position for a few seconds to a few days.
Long Term Trading
A long term trader can be identified by the time the trade lasts, plus how the trade is managed during the holding period. A long term trader can hold a position for a number of weeks to months.
Get Rich Quick Mindset
Since the rise of the Forex term trading popularity, adverts, banners promotions are all over the Internet and in the media. How much easier is it to sell a product with short term returns and big profits? So naturally those looking for new customers will tout, fast paced excitement, with lots of trades, and big money to be made in a short time frame – minutes even.
Brokers
Some brokers will promote short term trades, in fact lots of trades for obvious reasons. The more trades you make the more money they earn from your account. You will notice that a lot of the free training offered by brokers focuses on short term trading.
Listed below are the main differences between the two types of trading.
The Spread
Because short term traders trade more, they are disadvantaged by, having to overcome the spread more often.
Tunnel Vision
Some traders become so focused on one or two pairs, they don’t see anything else happening in the market round them. Forex is a fast paced market, and by having tunnel vision opportunities can be overlooked or missed altogether.
Less Flexibility
Being a short term trader means, of necessity you will have to frequently deal with bracket orders. A bracket order is where you predetermine your exits, which you enter at the same time as taking the position.
As a long term trader you have the greater luxury of time to make adjustments and manage your trading. You can factor in risk control when new trends and information comes to hand.
General
Quite often short term traders can miss out on interest premiums or rollovers, whereas long term traders are in there for the longer haul and hang around to reap the benefits. For example they can create groups of positions that will acquire interest long term.
Long term trading is not so stressful, in that you don’t have to watch the market continually. However, don’t forget that for many short term traders it is this continual watching that gives them a “buzz”.
In the final analysis it will come down to what type of trader you think you are. If you don’t have a lot of time to spare to keep watching the market, and prefer a longer term approach, then long term is probably the right way for you.
But the short term trader is in it not only for the quick returns, split second decisions – part of the thrill is the enjoyment of living on the edge.
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