Short-term vs long-term trading, which one is the best?

Short term vs long term trading
Short-term vs long-term trading

What are the advantages and disadvantages of short-term and long-term trading?

For the introduction, what meant by short-term trading here is a technique of trading with open-close positions with relatively short time or the term scalping and day traders also fall into this category.

Whereas on the contrary, long-term trading is a trading technique with open-close positions for a long time even for weeks or we call swing traders.

Let's compare the opinions of traders on this matter.

Every trader must have their own style of trading, starting from the analysis stage to determining the position of a transaction or Open Order.


There are those who play Short Term and Long Term. I intentionally make this article fun and hopefully can be useful for new traders to choose the trading style which is most suitable.

Prior to the subject, please note that the forex market is for those who dare to lose at the beginning to gain profit.

But most traders forget, or from the beginning, they started this business with incorrect guidelines.


Both short-term and long-term strategies, both require exact numbers to exit, whether it ends in loss or profit.

What distinguishes only the amount we produce or we risk in each transaction.

The following is a comparison of short-term and long-term trading based on pros and cons:

SHORT TERM TRADING

PROS:

  • Daily Target. Transactions are carried out with a relatively small profit and stop-loss targets so that targets are more quickly met, both TP and SL. Transactions usually only require less than 1 day.
  • Easier Automation. Short-term trading allows for a greater number of transactions. Short-term traders are usually familiar with the use of EAs or trading robots.

CONS:

  • Expensive fees. Because of massive transactions, commission fees are even greater.
  • Big risk. Short-term trading has a big risk if you use a large transaction volume of a lot.
  • Inaccurate analysis. There is a lot of noise in the analysis because it uses a small timeframe (like M1, M5, M15, M30, and H1).

Why Choose Short-term Trading?

Skill analysis is very necessary to run this method. There is a lot of noise in a small timeframe. And if you are a scalper, do the OP when the Euro or American open market.

Pair selection also affects. Choose pairs with low spread amounts. Usually, pairs that have low spreads are major pairs with high liquidity such as EURUSD, USDJPY, or GBPUSD.


LONG-TERM TRADING

PROS:

  • Cost-effective. Long Term Traders usually determine 1 or 2 Entry with large target pips. To reach the target usually takes days or even months. No need to OP every day because it costs an expensive commission to the broker.
  • More Accurate Analysis. Professional traders already understand that analysis using small timeframes like M1, M5 to H1 has noise or false signals. Long-term traders analyze using H4 timeframes to Weekly and even Monthly.
  • Minimal Stress. Because of the long target, traders need not waste time and thought to make an analysis every day to trade.


CONS:

  • Psychological burden. The main challenge of the long-term trader is waiting for the TP to hit the position. At the time of floating profit, the psychological burden forced the trader to close the transaction manually with profit, not under the initial target.
  • Big Stop Loss. The number of pips for stop loss in each transaction is large. Usually, a minimum stop-loss applied between 1000 - 2000 Pips.
  • It requires large capital. Because it requires a large margin of resilience, it is not surprising that long-term trading must have a large capital. We can arrange but small capital also does not rule out the possibility of money management.

Why Choose Long-term Trading?

Long-term trading is suitable for traders with high psychological levels. Don't choose this style if you are a type of trader who expects daily returns. If you don't want minimum risk, use a minimum lot volume for long-term play.

To avoid swaps or large costs, choose a pair that slaves swap or even swap plus.

Conclusion:

Whether it's long-term or short-term trading, you need patience and discipline.

Using Stop Loss is mandatory to limit your risk.

Honestly for me personally, I often lose on short-term trading. Whether it's a habit or what, I'm often greedy and take big lots.

For short-term trading, there is often a false signal than when trading long term, it's my opinion.

However, short-term trading is a solution if we limit capital.

So which is the best conclusion from both, which is the best?

If you can combine the two, maybe it's better. For example, if it limits capital, then open a position with a short-term style. Now if you can profit and estimate the trend is still long, then do not close the position first but leave it open for a few days and you are trading with the long term :)

Thanks.

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