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Short and long term Forex trading
Written by: PaxForex analytics dept - Monday, 17 November 2014 2 comments
The main principle of short term trading can be considered as a statement that the smaller the duration of trading, the less money you can earn. Think about your last investment in something not related with Forex. Most likely the term of it exceeded one day. Because the universal rule of life corresponds to the principal rule of speculation: a growth of earnings takes time.
Successful Forex traders know that in one minute the market can move only at some very short distance; in 5 minutes it might take a little further ; in 60 minutes - even further, and it is absolutely unknown how much further it can take for a day or a week. Short term trading limits profit potential. Therefore, there are few examples of traders who have achieved good results in this kind of Forex trading.
The argument for the work during just the day time is often a misconception that by leaving open positions for a night you can not be influenced by significant news, and so your risks are minimal.
First of all, your risk is under your control. You have the ability to set stop-losses , ie the level at which the position is automatically closed. Even if the next morning the market opens with a gap far away of your stop-loss, there are methods of limiting losses. Once you set the position with a stop-loss, you can lose only a predetermined amount of money. No matter when or how you opened the trading order, stop limits the
Your risk is the same whether you buy at the absolute maximum of the market, or at its absolute minimum. Refusal to take trading positions overnight limits the amount of time during which your investment should grow. Sometimes the market is opened against you, but if you are on the right track in most cases the market will be in your favor.
And more importantly, ending your trade at the end of the day, or worse, in some artificial moment, say, in five or ten-minute timeframe, you radically limit the potential profits. Remember the statement that the difference between winners and losers is that losers hold on for their losses.
Another difference is that the winners keep their winning positions, while the losers go away too early. It looks as if the losers can not stand being in a winning position: they are so happy to get at least some profit, that go out of the game very early (usually within a day of the entrance).
You will never make more money, until you learn to keep your winning positions, and the longer you keep them, the more potential for profit you have.
When successful farmers seeded the field, they do not dig up the plants every few minutes to see how they grow. They allow them to germinate and grow. Traders could take a lot from this natural process of growth. The success of the traders is no different from the labor of the farmer: you need time to grow winning trades.