Scalping, Intraday or Long Term? Each of these types of strategies has its own advantages and disadvantages. In many ways, the choice of tactics is determined by the psycho type of the investor and his experience. Novice traders prefer to hone their skills on intraday strategies, active impatient traders prefer scalping, and professionals can combine long-term strategies in Forex with other tactics. It is about the “long-term”, about their advantages and disadvantages, read on.
Long-term Forex Strategies: Making a Choice
For long-term strategies, choose assets of commodity markets or exotic currency pairs. Such assets may be in a narrow corridor for a long time, after which they sharply move up or down. For example, the South African rand course in 2015. The low volatility of these assets makes short-term trading unprofitable, where the trader loses more on the spread. But smooth growth makes long-term strategies effective in Forex. An example is the growth of oil prices, which rose in 1.5 years from $ 20 to $ 75. USA. Trade is conducted on timeframes from H4 and higher.
The advantages of long-term strategies in Forex:
- The lack of haste and the possibility of in-depth analysis. In strategies designed for several days or more, a trader has time to not only evaluate past periods and take into account fundamental analysis, but also to predict several scenarios with appropriate solutions.
- Lack of emotional stress. Unlike scalping, which morally depletes the nervous system, long-term strategies do not require so much stress. However, for some traders, a long wait, on the contrary, is a problem. Much depends on the nature of the trader and the ability to control themselves. But you can say for sure that “long-term” brings discipline, patience, self-control and the ability to restrain emotions (composure) in a trader.
Disadvantages of long-term strategies in Forex:
- A small profit, large spreads and the risk of being left without a deposit. This type of trade is more like a type of long-term investment, where a deep analysis is not done, but the money is invested with the expectation of earning in the future. Working on such tactics, the trader will not close the position with a local drawdown. But if it turns out to be more than local, then there will be a stop out.
- Patience is required. Not every trader is ready to be in the market for several days with ghostly prospects.
- High costs. In long-term strategies, swaps are added to the spread, which also triple before the weekend. Because traders prefer to close positions before the weekend.
- Technical points. The computer must be turned on all the time, and the VPS server will not be superfluous.
Long-term strategies are conveniently run in the background, working in parallel with short timeframes. For risk insurance, you can open positions on instruments with opposite correlation. It will be interesting to know your opinion on long-term strategies in the comments!