Trading on short-term periods in Forex market is often considered to be a more popular practice than long-term trading. In short-term trades, your positions usually do not last longer than a day, while in long-term trading, they can remain open for years. Although I prefer to trade using the long-term charts and to hold my positions open for longer periods of time, I admit that short-term Forex trading has its advantages:
- You can trade on thousands of opportunities when currency rates change with high volatility. You can capture every swing — up or down, trade inside the ranges and channels. Even the sideways market can be traded in short-term. When you trade long-term, you miss these opportunities.
- You do not have to tie up your funds for long periods. Your margin capital is locked only for short periods and you can easily get it out of the trading account if you really need it and then put it back and continue trading without any problems. In long-term trading, your money gets caught into positions for months.
- The majority of Forex trading signals work only for short-term trading. Usually, both technical and fundamental signals offer trading opportunities that are gone in less than several hours. The number of signals and events that influence currency rates on the long-term scale is really small.
This is what you get if you like to trade inside the day and use such techniques as breakout trading, scalping, news trading, range trading and any other short-term strategy. Of course there are also some disadvantages in short-term trading, but they are not the topic of this guide. Short-term Forex trades are pretty tempting for a new trader, but their risk is in their volatility. If you can set a reasonable stop-loss and still make money, that is the best possible situation to be in on the short front.
