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Short-term Forex trades versus long-term Forex trades

In the Forex market - also known as the foreign exchange market - traders buy and sell foreign currencies and make money off of the variations in exchange rates. Some traders make short-term trades on a daily basis, while others hold their positions for much longer before making their transaction. Depending on the amount you're willing to risk and the amount of time you have to spend on making trades, you can choose to engage in long-term trading, also called position trading, or short-term trading, often referred to as day trading.

To begin, one of the benefits of short-term trading is the ability to let go of positions before they could potentially decline. Beginners to the Forex market often prefer short-term trading because it is less daunting than long-term trading, which requires you to stay in the market (and therefore remain vulnerable) for a much longer period of time. Simply put, short-term trading is less risky than long-term trading. Though short-term trading may not be as lucrative as long-term trading, it is often less stressful and therefore allows traders to make confident, rational decisions. Since your state of mind is very important when trading in the Forex market, this can be a significant advantage.

Though short-term trading has its advantages, long-term trading can also prove lucrative if done right. Also, long-term trading is less demanding in regard to the day-to-day requirements of the trader. People who engage in short-term trading often treat Forex trading like a full time job, whereas long-term traders are able to trade in their spare time while also having a day job.

In addition to the lesser time requirements, one of the main benefits of long-term trading is that it's easier to predict market fluctuations over long stretches of time. Long-term traders can study seasonal trends and analyse the status of economies based on quantitative figures, such as unemployment and interest rates. There is much to gain from long-term trading, as this more patient approach allows market positions to gradually build and create large returns at the point of sale.

Thus, the two main ways the forex market can be approached is through short-term day trading or long-term position trading. You can choose which method best suits you based on how involved you wish to get in the market and what approach. It is also possible to engage in both long-term and short-term trading and benefit from each method.