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FinanceThe most common Forex trading styles

The most common Forex trading styles

Forex allows you to earn money quickly with a minimum of capital, but you must have an investment plan before attempting this adventure.

One of the steps in this plan is to choose a trading style that can be short, medium, or long-term. Each style has advantages and disadvantages, and the choice depends on the trader’s experience and the capital he is willing to invest.

The short-term trading style

Short-term trading involves making transactions within minutes by trying to predict whether the value of a currency will rise or fall. The qualities to perform this type of trading are:

  • great focus,
  • perfect stress management,
  • complete mastery of market trends.

In general, it is advisable to isolate yourself to avoid being disturbed during this type of trading because sometimes you have to make decisions in a few seconds. The main advantage of short-term trading is that you can make profits within minutes.

The main disadvantage is that one needs years of experience to quickly predict market trends. One must manage the stress because the losses can be brutal.

Technical analysis is essential for success in short-term trading and involves the use of tools such as Japanese candlesticks or the moving average.

A Japanese candlestick is a chart that displays a value’s bullish or bearish trends at an interval ranging from 5 to 10 minutes.

The moving average is a technique that allows you to know the previous evolutions of a value. Forex novices should never attempt short-term trading, or they risk going bankrupt within a few days.

Medium and long-term trading

Most investors prefer medium-term trading, and the principle is to carry out the transaction in the morning to follow its evolution until the evening. It is also called Day Trading, and it is less stressful than short-term trading. It also will make it viable to generate interesting profits if its analysis is carried out correctly.

One of the advantages of Day Trading is that you can put Stop Losses in your transactions. The Stop Loss is a protection that will stop the operation if the trend is too fluctuating or when it follows a reverse trend, according to the trader’s analysis.

It also allows you to reduce losses and recover stakes. Finally, all trades that exceed 24 hours are classified as long-term trading.

The main advantage of this style is that one can invest in exotic currencies (Indian Rupee, Chinese Yuan, etc.) to make the maximum profit. In addition, there is much less stress because you can always stop an operation in due time.

The choice of trading style

As mentioned, only experienced traders can trade in the short and medium term. They will have to react very quickly to market fluctuations without forgetting that they will have to have sufficient capital.

Indeed, trading platforms require capital between 5,000 and 15,000 euros for the trader to use the short-term strategy.

For novices, it is advisable to start with long-term trading. Once they have enough experience, they can try medium or short-term trading.

However, whatever strategy or trading style you choose everything can fall apart  if you choose the wrong brokerage service. So make sure to read reviews such as Market Giants Review, in order to learn more about the specific broker. Test their customer support via all the channels available. Finally, make sure the broker is regulated and operates in compliance with the law. 

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