To receive new articles instantly Subscribe to updates.
What is Short Term Forex Trading?
Written by: PaxForex analytics dept - Monday, 19 June 2017 0 comments
Forex trading can encompass a wide range of different trading strategies and techniques. Some of these techniques might seem more suitable for particular traders than others, depending on the particular temperament and character of the individual. Short-term trading the forex market has always been popular for traders that are lacking time but enjoy the excitement of being exposed to the market. Several basic concepts must be understood and mastered for successful short-term trading. These fundamentals can mean the difference between a loss and a profitable trade.
Forex trading is generally split up into 3 categories. Short term, which is any trade that lasts less than 24-48 hours. This can be as little as 5 minutes or as long as 2 days but it is generally referred to as short term forex trading. Medium term is from 2 days to a week or 2, this is also called swing trading and can be highly effective for the beginner trader. The final type is longer term trading, this is any trade that lasts longer than 2 weeks, usually longer than a month and up to 2 years.
Short term forex trading can be highly stressful if done over a long period of time. You need quick fingers to trade in and out of positions and you need to make decisions quickly regarding entries and exits. You also are often faced with requotes from your broker and will often come under close scrutiny if you place a
lot of short term trades with them that only last a few minutes. Overall it is quite a stressful occupation which is why long term forex trading generally makes a lot more sense.
The core idea of short-term forex trading is to adopt a strategy which will allow a trader make as many entries as possible during very short time frames usually ranging from 1 to 30 minutes (M1 to M30). Short-term trading is done during the periods with the greatest volatility. While there are strategies where traders take guidance from technical analysis, there are also those which are event-based. In short-term trading, technical analysis is more important. If you manage to shape your personal short-term forex trading strategy that takes into account both and serves you well, it will be only beneficial.
The biggest challenge of short-term trading is the same as the top trading mistake. Too few traders looking to scalp actually do so correctly, under the incorrect presumption that trading on really short-term charts gives them enough control to trade without stops while keeping your finger on the trigger may give you more control, it means absolutely nothing if prices gap against your position or if a really big piece of news comes out that completely de-rails your trading plan. So, even though you may be watching price action on a five or fifteen-minute chart, protective stops are still needed.