Short term and long term are the two types of forex trading methods that are popular among traders. You can choose your type of trading depending on your specific needs and requirements. The type of strategy that you choose to adopt for the currency pairs that you wish to trade may depend on whether you opt for short term or long term trading.
If you are a beginner it is best to do adequate research before you make the choice. You can seek the opinion of experts. You can also make use of the many resources that are available online to gain knowledge about them.
Different types of forex trading
In short term forex trading a trader opens and closes a trade within minutes. This enables them to take advantage of the small price movements of currencies and make profits. Most traders use the leverage tool to trade and make big profits. As the open positions are closed on the same day the volatility of the market does not affect it. Economic and political news at the end of the day may also not affect the trade.
You may be able to realise profits quickly when you opt for short-term trades. However, one of the things that you need to be careful about when you choose this type of trading is that you may be using a big leverage to place a trade and this can be tricky at times. If you are not careful you may incur big losses.
In medium term forex trading the traders look to hold on to positions for more than one day. They try and take advantage of the many profit-making opportunities that are available in the market.
As leverage is needed only to increase profits you may be able to place a trade even with small amounts of money. The only disadvantage of opting for this type of trade is that you may get fewer opportunities to make profits, as favourable conditions in the market are few.
In long term trading the traders hold on to a position for weeks or months based on the fundamental factors. In some cases the positions may be open even for years. As the trade is kept open based on fundamental factors it is often considered a reliable way to make profits.
You may require large capital to cover the volatility that is prevalent in the forex market if you opt for long term forex trading, and this may be restrictive for small traders. Although you may be able to make profits you may have to wait for a long time with a large investment blocked in this trade.
Tips to choose different types of forex trading
Before you make the choice of short term, medium term and long-term types of trading you need to gain knowledge about the advantages and disadvantages of each type of trading so that you are able to make an informed choice. You need to understand that depending on your choice you may have to choose the pair of currencies that you wish to trade and the strategies to be used.