Is it bad to be a medium-term trader?
The main thing in Forex trading system, besides knowing how to enter the market correctly and how to exit it even more correctly, is risk evaluation and competent capital management. It is equally bad to overload an account with large number of deals and not to use the deposit to its full extent, overly reinsuring the size and number of open lots.
Still, a trader's trading system should include money management and regulate the amount of used margin as a percentage of the total deposit. Usually it is 2 - 5%.
Pluses and minuses of medium-term trading in Forex It is no coincidence that at the beginning of this article I paid attention to the issue of exiting a trade, considering this moment of trading as important as entering the market. Indeed, having closed a position earlier we are not only worried when calculating lost profit, but also we have to patiently wait for the next entry, which may come very, very soon.
Missed entries are followed by a stop loss. And it is good if that stop-loss is in a breakeven zone. I will never forget losing 500 points of profit on GBP/JPY, which has eventually resulted in a break-even level. Most often such mishaps occur when a trader misjudges the duration of a trade in light of the time periods. The position opened by the trader is short-term or, on the contrary, it is designed for a longer trading period.
Medium-term forex trading is safer, although it implies relatively long distances to initial protective orders.
In this case, the trader should not react violently to the slightest price changes and be prepared for the fact that in the first stage of trading his profits will be followed by losses and losses - because he will have to wait for the price pullbacks and corrections.
The desire to close the deal at this moment and get a legal penny or two is great. But, medium-term trends do not "break" quickly, but whether the market will give the opportunity to enter another transaction to replace prematurely closed - is questionable.
And so sad to see the trend gaining momentum, being out of the market, that even the penny ringing in your pocket is not happy. Again, medium-term forex strategies give more opportunity to close a trade at the end of the move.
The trend is like a car flywheel, which takes effort to unwind, but then, after the external forces are over, it keeps moving by inertia for some time. It is this inertia of the price movement that allows the trader to complete his trading without any hurry.
Besides, medium-term trading on Forex allows managing the deposit more effectively when trading with different instruments. Having closed a deal on some currency pair, after that the trader may open a new trading instrument, and then, if desired, a third one.
Of course, it requires certain skills, but the medium-term caliber frees the player from making hasty decisions, and makes it possible to conduct an unhurried and in-depth analysis of the trading situation, select several promising instruments, of which he can then settle on one or two.
With my article I'm not calling followers of day trading to abandon their beliefs and switch to trading on daily charts, I just want to tell you about some advantages of medium-term trading, which sooner or later comes to most of the players who have managed to survive in the market.
So maybe this transition should be made a little earlier?