Why do traders love financial markets? Because everyone can find a way to make money that works best for them. Impulsive people typically choose to scalp and can make profits while being under pressure from one to several hours a day. Those who are less quick to react but are patient and considerate opt for medium-term trading style.
In today’s article, we are going to get to the bottom of it. And since you are already aware of what pipsing and intraday trading are, it won’t be difficult to compare the pros and cons of this trading style.
1. Medium-Term Trading: Distinctive Features
2. What Is Medium-Term Trading in Forex
3. Medium-Trades in Forex: Strategies
4. Medium-Term Trading: Summing Up
As the name suggests, this trading style has a certain time period for which a position is opened. When it comes to pipsing, the position is held for several minutes and even seconds. In day trading, you make trades within one trading day. Now by opting for a medium-term trading style, you hold a position from several days to one-two weeks.
Here are the advantages of this trading approach:
1. You don’t have to spend a lot of time trading every day.
2. The trader may have less than a dozen trades (depending on the initial capital and the market situation) in the course of a month; however, each of them is capable of generating profit worth a couple of hundred pips.
3. This trading style is less emotionally-demanding.
Medium-term trading is suitable for those traders who already have a main job in another field and don’t have much free time on their hands to engage in full-time trading. With this trading style, less than an hour a day is enough to do an analysis and make a forecast, choose prospect entry points, open positions when the right signal emerges and maintain them until the goal is achieved.
What types of markets will the medium-term trading be suitable for? Practically any market. You can trade stocks, currencies, and even commodities (oil and gold). Medium-term forex trading implies that a position is held open from several days to 1-2 weeks.
To achieve a successful outcome, here’s what you need:
1. Fundamental analysis. Monetary policies of the central banks, their meetings, the release of the macroeconomic statistics have a major impact on the direction of the currencies and need to be factored in.
2. The position is entered based on the technical analysis. You need to do it by starting from a monthly time frame and gradually moving to the one you’re currently trading. The trades are made on the daily and four-hour time frames.
3. When opening positions from strong technical levels, the medium-term trading can produce trades with a 1:4 risk/reward ratio which, in some cases, can even reach up to 1:10.
4. The only downside of the long-term forex trades is that the swap is charged for holding positions open overnight.
The best medium-term strategies used in Forex are focused on finding the right entry point with the minimum risk and maximum profit potential. But how do you do that?
Strong price levels are typically used to trade medium-term. The range of the big market players that are pushing the price is quite wide. And so, if you enter the position at the beginning, you can make a big profit with a small risk.
But how exactly do you identify these levels? To do this, you will have to track down the accumulation of volume provided by the Chicago Mercantile Exchange or you can take a shortcut with the Real Market Volume indicator that will do it for you. This solution analyzes volumes traded by the market sharks automatically and displays strong support and resistance levels in the chart.
Main benefits of the medium-term trading include relatively small time expenditure associated with position opening and maintenance. What is important is to find entry points with high profit potential (range).
And there is no need to reinvent the wheel. Track down strong price levels and market direction with Real Market Volume indicator. Plus, don’t forget to use proper risk management and place stop loss and take profit to protect your positions.
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