Forex traders have varying styles and strategies in the way they trade. And based on their forex trading strategies, they can be classified into two major groups: short term forex traders and long term forex traders.

Short Term Forex Trading

Short term forex trading is the kind of trading employed by investors who prefer the action and volatility of intra-day trading. Most of the time investors who prefer short term trading would want to sit in front of their computers and wait for the perfect set up according to the technical analysis of their trading strategy. Once the perfect set up is achieved, they enter the market. And once they enter a position in the forex market, they continue to monitor that trade until it gives them a profit or a loss, depending on where the price of the currency pair goes.

Short term forex trading has its own advantages. The most obvious of which is that with the quick entry and exit of the investor in the forex market, he already knows by the end of the day whether he has profited or lost with the trade position that he took. Short term forex trading also takes away the danger of prolonged exposure of an investor’s capital in a volatile market. Since most of the time, a short term forex trader liquidates his position whenever he foresees that he will not be able to monitor the market for a prolonged period of time, he protects his capital from any unforeseen eventuality that may affect the currencies he is trading.

Long Term Forex Trading

Long term forex trading, on the other hand, is the type of trading employed by investors who rely more on the fundamental basis of currencies. There may be some degree of technical analysis involved, both it is not as pronounced when compared to short term forex trading where technical analysis dictates the perfect timing of entries and exits. Long term forex trading may take anywhere from weeks to months in order to liquidate a position. An investor who prefers long term forex trading does not really care about the daily volatility in the prices of currencies he is trading. What he mostly cares about is the general direction of the currency pair, and the underlying fundamentals, such as the corresponding countries’ economic conditions, to support and continue supporting the position that they are in.

The main advantage of long term forex trading is that it does not tie up the forex investor in front of his computer just to monitor the trade. This is very ideal for the passive forex investor with a day job who just wants to take advantage of the benefits of forex without the stress associated with price fluctuations affecting the profitability of trade positions.

Depends On Trading Goals and Personality

Being a short term or a long term forex investor really depends on the type of trading personality and investment goals of a particular investor. If he likes the fast-paced, high stress level, and action-packed environment, then short term forex trading may be for him.

However, for some types of forex investors, they do not want the excitement of the live daily action the forex market. They do not care if the lack of action in their forex investment holds their capital. They prefer protecting their capital than exposing them to the high risks of day-trading.

So when deciding on what type of forex investor you would want to be, ask yourself the necessary questions pertaining to your trading personality. The amount of time that you can allot to the actual trading of your investment has a lot to do with it. Can you actually do the monitoring required by day-trading if you prefer to be a short time forex investor? How much time can you actually spare each day to analyze the market and wait for the perfect set up using technical analysis? Maybe you would be better off being a long term forex trader if your investment goal is just to find a more lucrative alternative to your bank time deposit. And it is also important to note that forex investors should take their health into consideration when deciding which type of investor they want to be. The excitement of the daily volatility in short term forex investing may prove to be too much for a person with a weak heart.

And lastly, although it is short term vs. long term forex trading, who says you cannot combine both? There are ways in doing it in order for an investor to get the benefits of both worlds.

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