There is a huge debate between short-term forex traders and long-term forex traders as both sides believe that their trading style is better. It cannot be said for sure which is more profitable as many other factors are involved when trading such as strategies used, market behavior, investor’s personality, and much more, all that affects the trades and their success rate.
Both trading styles have risks as well benefits. It is up to a person’s personality type and trading goals that help them decide which trading approach might be better for them.
Long-term trading is a trading approach that involves a trader holding their trades for a longer time as compared to short-term trading. Usually, for long-term trading, an investor might hold their buying or selling position for more than days, weeks, months, or even years, and for short-term trading, the duration of their buying or selling position is limited to seconds, minutes, hours, days and sometimes a week.
Many beginners have trouble deciding which one is a better approach to forex trading, so here we are going to tell you the pros and cons of both trading styles that might help you in deciding which style suits you the best.
Pros of short-term trading
- It gives you an option to earn quick profits within a day. Since it is done over a short period, it shows your profits instantly.
- Involves lesser risks as the loss is lesser because the investing capital is less so if you lose one trade you might not face a huge loss.
Cons of short-term trading
- When the market is volatile you might lose more than you anticipated because sometimes the market’s behavior is very unpredictable.
- The constant monitoring of your trades and daily unpredictability that involves prices changing rapidly keeps you under constant pressure.
- It is very time-consuming as you have to monitor your trades constantly to make decisions regarding entry and exit points.
Pros of long-term trading
- Involves less stress as you do not have to constantly monitor the market behavior. This gives you the advantage to stay relaxed that in turn helps you make smarter and calculated decisions.
- It also saves time as you do not stay glued to your screen to check market changes.
- This style has a more cost-to-profit ratio as you do not open multiple trades, which saves your cost on commission charges.
Cons of long-term trading
- It involves chances of facing a huge loss as you invest huge capital to earn more profit.
- It requires in-depth knowledge and extensive research on the market behavior especially your fundamental analysis should be strong.
- You need to have a lot of patience and a calm personality to wait for fruitful results and do not get swayed by minor market changes.
In conclusion, it could be safe to say, it depends on an investor’s personal goals and trading preference that will guide them to go for a particular trading style. However, it is suggested that using both methods according to your advantage will increase the chances of getting maximum benefits from both styles.