Forex long term or short term are term used in forex trading to explain some certain procedures in a trade. Every trade is either a short term trade or a long term trade. In this article, we will discuss what a long term trade is, and what a short term trade is too.
WHAT IS LONG TERM IN FOREX TRADE?
In forex trade, long term means hold a security for an extended period of time. The period a security is held in forex trade has to do with the type of security in question. Generally, a long term asset can be held for as long 1 year or even longer, like 30 years. It is important to note that it is the definition of “long term” may vary from a trader’s point of view. For instance, a day trader’s description of long term might be anything from six months to one year; unlike a buy-and-hold investor who might look at a trade due to mature in one year as a short term trade.
BENEFITS OF LONG TERM TRADE
- A long term trade is usually one of the few trading opportunities hard to find in the forex market. Investing in a long term trade is one way of focusing on a particular trade for maximum benefit. Especially when the trade has high success rate.
- Another good benefit of long term trade is that it gives the long term trader the time to plan carefully before executing any actions. There are trading tools, like forex orders. The trader can use these tools more carefully without being in a rush.
WHAT IS A SHORT TERM TRADE?
If a forex trade is defined as a short term forex trade, then it refers to the concept of holding an asset for one year or less. From an accountant’s perspective, the term “current” is used to describe short term trades where an asset is expected to be converted into cash in one year. Accountants also use the term current to describe a liability coming due in the next year. So, in summary, accountants define short term as current, which refers to cash or an asset that would be converted into cash the next year.
BENEFITS OF SHORT TERM TRADE
In forex trade, some traders prefer to go on a long term trade while some others prefer to go on short term trades. It is a matter of personal preference, as well as trading strategy. Here are some benefits of short term trades
- The trade capital required in short term trade is easily affordable compared to the amount of money used in short term trades. This makes it possible for a trader involved in short term trade to have some money left for other trading opportunities.
- Because the trade is only for a short period of time, the trade capital is at risk only for a short period of time, after which it is freed up for other trading activities.
- Short term trade is beneficial for people who find it difficult to wait as long as 10 years before the results of one long term trade starts to manifest. It is also good for new traders who are not yet deeply rooted in the market to understand what long term trade is all about.