Retail traders just starting out in the forex market are often unprepared for what lies ahead and, as such, end up undergoing the same life cycle: first they dive in head first – usually losing their first account – and then they either give up, or they take a step back and do a little more research and open a demo account to practice.
Those who do this will often eventually open another live account, and experience a little more success – breaking even or turning a profit. To help avoid the losses from hastily diving into forex trading, this article will introduce you to a framework for a medium-term forex trading system to get you started on the right foot, help you save money and ultimately become a profitable retail forex trader.
Why Medium Term?
So, why are we focusing on medium-term forex trading? Why not long-term or short-term strategies? To answer that question, let’s take a look at the following comparison table:
|Type of Trader||Definition||Good Points||Bad Points|
|Short-Term (Scalper)||A trader who looks to open and close a trade within minutes, often taking advantage of small price movements with a large amount of leverage.||Quick realisation of profits or losses due to the rapid-fire nature of this type of trading.||Large capital and/or risk requirements due to the large amount of leverage needed to profit from such small movements.|
|Medium-Term||A trader typically looking to hold positions for one or more days, often taking advantage of opportunistic technical situations.||Lowest capital requirements of the three because leverage is necessary only to boost profits.||Fewer opportunities because these types of trades are more difficult to find and execute.|
|Long-Term||A trader looking to hold positions for months or years, often basing decisions on long-term fundamental factors.||More reliable long-run profits because this depends on reliable fundamental factors.||Large capital requirements to cover volatile movements against any open position.|
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