Long Term VS Short Term Trading – Forex Insight – What are the advantages and disadvantages of long-term and short-term trading? Let’s compare the opinions of professional traders here.
Every trader must have their own style in trading, starting from the analysis stage to determining the position of the transaction or Open Order. Some play Short Term (short term), there are also Long Term (long term). This article was deliberately created to help beginners like you to choose which trading style is most suitable.
Before getting to the point, please note that the forex market is there for those whodare to lose’ in the beginning for the sake of making a profit. However, most traders forget or from the start they started this business with the wrong guidance.
Long Term VS Short Term Trading
Both long-term and short-term strategies both require the right number to exit, whether it ends in loss or profit. The only difference is the amount we generate or risk in each transaction.
Here’s a comparison of long-term and short-term trading according to professional traders:
LONG TERM TRADING (LONG TERM)
- Save Cost. Long Term Traders usually determine 1 or 2 Entry with large pips targets. To achieve the target usually takes days or even months. No need to OP every day because it costs expensive commissions to the broker.
- Minim stress. Due to the long target, traders do not need to waste time and thought making analysis every day to trade.
- More Accurate Analysis. Professional traders already understand that analysis using small timeframes (M1 to H1) has noise (or false signals). Long term traders analyze using timeframes H4 to Weekly and even Monthly.
- Big Stop Loss. The number of pips for stop loss in each transaction tends to be large. Usually, the minimum stop loss applied is in the range of 1000 – 2000 Pips.
- Psychological Burden. The main challenge of long term traders is waiting for the position to hit the TP. At the time of floating profit, the psychological burden forces traders to close their manual transactions with profits not according to the initial target.
Why Should You Choose Long Term Trading?
Long-term trading is suitable for traders with a high level of psychology. Do not choose this style if you are the type of trader who expects daily returns. If you don’t want minimal risk, we recommend using the minimum lot volume for long-term play.
To avoid large swaps or stays, choose a swap-efficient pair or even swap plus.
SHORT-TERM TRADING (SHORT TERM)
- Daily Goals. Transactions are carried out with relatively small profit and stop loss targets so that targets are met more quickly, both TP and SL.
- Transactions usually only take less than 1 day.
Easier Automation. Short-term trading allows a larger number of transactions. Short-term traders are usually familiar with the use of EAs or trading robots.
- Expensive Cost. Due to massive transactions, commission fees are even higher.
- Less Accurate Analysis. There is a lot of noise in the analysis because it uses a small timeframe (M1 to H1).
- Big Risk. Short-term trading carries a large risk when using a large volume of transactions (lots).
Why Should You Choose Short Term Trading?
Strong analytical skills are needed to run this method. There is a lot of noise in the small timeframe. And if you are a scalper, you should do OP when the Euro or American market is open.
Pair selection also affects. Choose a pair with a low spread amount such as EURUSD.
Be it long-term or short-term trading, you need patience and discipline. The use of Stop Loss is mandatory to limit your risk.
By: Steve Kandio