There are several ways to classify traders but one of the most significant differences is the one between short term and long term traders. Traders in both camps may use technical and fundamental analysis and stop and limit orders in very similar ways but with some important differences that can lead to disaster if not properly understood. While trading style depends on a trader’s personality type and risk appetite, most forex traders usually prefer and apply short-term trading strategies in the market.
Forex long term or short term are terms used in forex trading to explain some certain procedures in a trade. Every trade is either a short-term trade or a long-term trade. A long-term trade is usually one of the few trading opportunities hard to find in the forex market. Investing in a long-term trade is one way of focusing on a particular trade for maximum benefit. Especially when the trade has a high success rate. Another good benefit of long-term trade is that it gives the long-term trader the time to plan carefully before executing any actions.
Long-term forex trading is the type of trading employed by investors who rely more on the fundamental basis of currencies. There may be some degree of technical analysis involved, both it is not as pronounced when compared to short-term forex trading where technical analysis dictates the perfect timing of entries and exits. Long-term forex trading may take anywhere from weeks to months in order to liquidate a position. An investor who prefers long-term forex trading does not really care about the daily volatility in the prices of currencies he is trading. What he mostly cares about is the general direction of the currency pair, and the underlying fundamentals, such as the corresponding countries’ economic conditions, to support and continue supporting the position that they are in.
Short term forex trading is the kind of trading employed by investors who prefer the action and volatility of intra-day trading. Most of the time investors who prefer short-term trading would want to sit in front of their computers and wait for the perfect set up according to the technical analysis of their trading strategy. Once the perfect set up is achieved, they enter the market. And once they enter a position in the forex market, they continue to monitor that trade until it gives them a profit or a loss, depending on where the price of the currency pair goes.
Long-term trading is less time consuming since you don’t have to watch the live market all day, every day. Many new forex traders are working a full-time job, raising a family and having a life while they learn this market. Checking in on your trades and making adjustments every once in a while, rather than constantly watching the live market throughout the duration of the trade, requires a lot less time. Short-term trading requires a lot more attention to the market on a continuous basis. A much talked about aspect of trading is the toll it can take on you emotionally. The longer you are in front of your trading screen watching the market zigzag back and forth between your limit and stop, the more tempting it can be to interfere with your strategy.