How are Short-term and Long-term trading different?

Short-term trading and long-term trading, which one is better?

It is important to check which trading style suits you and which you prefer more.
In today’s lesson, we will introduce you to
the advantages as well as the disadvantages of short-term and long-term trading.

How are short-term and long-term trading different?

We define the difference between short-term and long-term trading in an easy-to-understand way as follows:

Short-term trading is buying and selling within a period of a few seconds up to 1 day.

Long-term trading is holding positions for more than 1 day.

In the following, we will explain the advantages and disadvantages of each type of trading and the timeframe of the charts used.

Advantages and disadvantages of Short-term trading.
Which timeframe should I trade in?

Short-term trading buying and selling within a period of a few seconds up to 1 day.

We will explain the advantages and disadvantages of Short-term trading.

Advantages of Short-Term Trading:

1. Earn profit within a short period of time

・Conduct trades when the price fluctuation is small within a short period of time.

・Although the profit per trade is not much, but you can accumulate profits by making multiple trades.

2. Ability to trade with a small capital

・Since the trades are executed multiple times with small price fluctuations, you can trade with a small capital.

・The small price fluctuations also help you avoid significant losses.

Disadvantages of Short-Term Trading:

1. Constant monitoring of the trading screen is required

・Since this is a trading method that seeks opportunities in an instant, you must constantly monitor the trading screen.

2. You must set and adhere to profit and loss targets

・Especially for short-term trades, it is crucial that you set and adhere to profit and loss targets.

・If you hold positions that are losing, there is a risk of automatic stop-loss within a short period of time.

※The details on how to set targets will be explained in the middle school lesson 9 of the Hirose Academy.

※ Please refer to the explanation about automatic stop-loss in the primary school lesson 8 of the Hirose Academy.

What timeframe charts is used for short-term trading?

For example：let’s compare the M15 (15-minute) and M1 (1-minute) timeframes when trading for 15 minutes.

Advantages and disadvantages of Long-term trading.
Which timeframe should I trade in?

Long-term trading is holding positions for more than 1 day.
We will explain the advantages and disadvantages of Long-term trading.

Advantages of Long-Term Trading:

1. If you trade in the same direction with the market trend, you can earn more profits.

・By holding positions for a long time, you can earn significant profits if you trade in the same direction with the market trend.
(You should trade on a cycle of a few days to a week. If it’s longer, it’s very rare for the market price to continue to follow the same trend.)

2. You don’t have to constantly monitor the trading screen.

・Once you have placed your orders, you don’t need to constantly watch the trading screen.

3. You can turn losses into profits.

・Since exchange rates are constantly fluctuating, even orders that are currently in a loss can turn into profits.

Disadvantages of Long-Term Trading:

1. Requires sufficient capital.

・Since you need to hold positions for a long time,
your account needs to have sufficient funds to avoid sudden losses due to exchange rate changes.

2. Cannot perform scalping trading

・You cannot engage in scalping* during times of large price changes when important economic news is released.

*Scalping in forex trading is a strategy that involves making numerous trades throughout the day to profit from small price movements, often holding positions for only a few seconds to minutes (short-term trading).

Regarding Overnight Fees (Swap)!?

If you hold positions for more than a day, overnight fees will be reflected in your trading account.
However, it can be an advantage or disadvantage because you may receive overnight interest (if positive) or have to pay an overnight fee (if negative). Overnight fees will be explained in the high school lesson 11 of the Hirose Academy.

What chart timeframe is used for long-term trading?

For example, let’s compare the M15 (15-minute) and H4 (4-hour) timeframes when trading over
3 days.

Which traders are suitable for Short-term and Long-term trading?

People suited for short-term trading

・Those who want to trade with an investment capital of $50 to $100.

・People who have enough time to constantly monitor the trading screen during the trading process.
(We provide a trading application that allows you to trade even during short periods of time such as lunch breaks.)

・Those who want to trade frequently and accumulate small profits.

People suited for long-term trading

・Busy people who don’t have much time to trade.

・Those who want to trade with an investment capital of $1,000.