At LearningMarkets.com, we are known for advocating longer-term trading strategies over short-term trading. In this section, we will explain why we feel that way and try to help you understand some of the advantages of long-term trading over short-term trading.
To be clear, while we feel that long-term trading is advantageous over short-term trading (especially for new traders), we understand that many traders enjoy operating in the very short term, and there are even a few who are successful at it. It is also appropriate to add that short-term trading can be fun. Some of us here at LearningMarkets.com allocate a small part of our portfolio to short-term trading because it is enjoyable.
However, this section teaches that long-term trading has the potential to be more profitable and provide more risk control. Plus, it is typically easier for new traders to learn and get started with longer-term trading strategies.
We classify a short-term trade as anything with a holding period of less than a week. Short-term trading includes day-traders and scalpers who may hold a position for a few seconds or minutes as well as short-term swing traders, who may hold a position for a few days. A great way to tell the difference between short-term and long-term traders is the chart period they favor. Longer-term traders tend to use daily charts. Short-term traders may use charts as short as 1 minute.
A long-term trader falls outside the short-term horizon and is not only identified by the period the trade lasts but also by how the position is managed throughout the holding period. Being a long-term trader does not mean you are a static trader who does not actively manage a position. A long-term trader may actively manage a position for several weeks to several months. Just to be clear, long-term trading is not the same thing as buy-and-hold.
Of course, there are many participants in the forex market who have a vested interest in encouraging short-term trading over long-term trading because they make more money when forex traders trade frequently. We encourage you to ignore much of what you hear from Biz-op (business opportunity) and Get-Rich-Quick programs and from dealers who encourage you to over-trade.