Forex Long Term Trading Beats Short Term Trading

By Josh Tam

Is it better to trade Forex long term or short term? It all depends on your own personal characteristics as a trader. Let me explain in detail.

Long-Term Forex Trading
Long-term traders are often called Position Traders. They analyze the market as a big picture, and then they open trades when they see that the situation is right, according to their own analysis. Then they may hold on to their positions for days or weeks. Long-term trading is suitable for traders with more patience and are able to wait a longer time to see returns.

Short-Term Forex Trading
Short-term traders can be day-traders or scalpers. Day-traders are traders whose trades last about 1-2 days. Some traders open trades after analysis and then leave them overnight, and the next morning, they check to see whether they hit a profit or loss. Scalpers are traders who aim to win just a small amount of pips in a very short time. Their scalping trades usually do not last very long... from seconds to an hour.

Both Long-Term Trading and Short-Term Trading has their own advantages and disadvantages, but from my own experience and opinion, long-term trading is the better of the two because of several reasons.

1. Long-term trading frees up time. Analysis can be done in maybe a few minutes to a few hours a week, and when a good trading opportunity is identified, you can let it run and spend the rest of your time working your other job or with your family.

2. Long-term trading is less risky. It lets you see the big picture when you zoom out to see the daily or weekly charts. Most of the time, we still lose trades although we forecast the right direction just because of random market movement hitting our stop-losses. But with long-term trading, these random movements are not big enough to reach our stop-losses and will go in our direction eventually - if we are indeed correct and a reversal does not occur.

3. Long-term trading gives you more time to standby. You see, scalpers need to fix their eyes on their screens when they trade, just to watch the market move up and down. They need to identify opportunities and grab them almost immediately. But with long-term trading, you will have hours to make up your mind to trade or not to trade.

From points 1-3 above, it is clear that long-term trading will not make you a zombie-trader. The big disadvantage of long-term Forex trading is the wait. There are still many short-term traders around because they are treating Forex as a job and Forex is their passion. Some of them just cannot wait so long and want to see realized profits fast and so they turn to day-trading or scalping.