Traders often dive head first into the forex trading market because they have heard that you can make quick profits. They are more often than not unprepared for the task ahead and this leads to bad trades being done and ultimate loss of their trading account. Some of them never return, but there are those that sit back and review the error of their ways. They will normally return to the market, do more research, learn more about the market and then go on to experience a more profitable trading career.
Medium Term Forex Trading
A medium-term forex trading strategy will allow you to settle into the forex market. There are distinct comparisons between short, medium and long term strategies.
Short-term traders are interested in opening and closing trades within minutes, thereby taking advantage of the small movements in price whilst using high leverage levels. The benefit to this method is that you obtain profits or losses quickly because of the pace of this type of trading. The disadvantage to this method is the large amount of capital you require or the large risk you take with high leverage levels to try and profit from such small movements.
Medium-term traders aim to hold their positions for at one day, but usually for longer periods. They use technical situations to their advantage. The advantage to this type of trading is that you do not require large capital amount because you will make use of leverage simply to boost your profits. The disadvantage to this method is that there are fewer available opportunities because this type of trade is more difficult to locate and execute.
Long-term traders often hold their positions for weeks or months. Their trades are normally based on fundamental factors. The advantage to long term trading is more reliable, long-term profits because of the dependability on fundamental factors which are more reliable. The disadvantage of this method is the large capital requirement that is needed to cover any major movements against your open positions in the long term.
From the comparison above, you will see that the short-term and long-term trades require high capital investment. The short-term trades need it to make use of sufficient leverage and the long-term trades need it to cover the volatility in the market. This type of trading exists very profitably in this market, but is normally undertaken by experience traders with the funds to do so. It is for these reasons that you should consider opting for a medium-term strategy as you are more likely to become profitable.
There is a basic framework you can set up to trade in the medium-term. One of the concepts most often used for this purpose is trading with the odds. It requires that you obtain a suitable system where you are able to obtain technical data and decide on your trades based on the output. It requires that you create charts and mark it up.
It is possible for anyone to make profits in this financial market. All you need is patience and a well developed strategy that you stick to. Making use of medium-term strategies will help you on your way to profitability and you will have no need to drop out of the market.