Types of trading in financial markets by the criterion of the duration of the transaction. Basics. Alexander Sivtsov.

Nowadays, there are quite a number of different trading strategies in the international financial markets, which are divided into different criteria, the main of which is the time of the transaction. The transaction types of trade are divided into three types: short, medium and long term. Now let’s take a closer look at each of them.

Types of trading – Short-term trading

Short-term trading means that the deal lasts no more than one working day, this type of trading is called intraday. The main advantage of this trading strategy is that positions are not transferred to another day, which excludes additional payment for swaps for transferring the transaction. It also reduces the psychological pressure on the trader. So, on the morning of the next day, unpleasant surprises will be ruled out, since to anticipate the situation is impossible. Also, it is worth considering that for short-term trading, the hourly chart should be used, which allows you to conduct several transactions during a trading day. The above mentioned advantages make trading within the day the most popular in the forex market.

Also, short-term trading includes scalping, in contrast to intraday. Deals on this trading strategy are on the charts from M1 to M15 and can last from a few seconds to half an hour, depending on the volatility in the market. The strategy is attractive for obtaining quick profits, as well as for a large number of transactions, which increases the potential profit, but also increases the potential risks. One of the disadvantages of this type of trading is that the trader must be constantly at the terminal, since all transactions are opened and closed manually.

Types of trading – Medium-term trading

Medium-term trade is the second most popular among traders after intraday. The popularity of this trading strategy is explained by the fact that with less time spent compared to trading within a day, the trader receives an excellent profit, albeit slightly less than when trading in a shorter period, which is explained by the smaller number of deals and the additional costs of paying swaps for the transfer transactions.

The essence of the strategy is that the transaction lasts from several days and even up to a week, which requires excellent knowledge of both technical and fundamental analysis, since during the transaction the price may be subject to pressure against due to a various fundamental factors. But, the trader has sufficient amount of time for making a weighted decision and further planning of the trade. It is worth noting that a trader who uses the medium-term type of trading is more disciplined and adheres to the plan and the conditions of money management. Also, when trading in the medium-term, it is worth considering that the stop-loss level will be higher than when trading intraday, but at the same time profit targets will be more valuable.

Types of trading – Long-term type of trading or positional

This type of trading is the least common in the forex market, as it does not bring much profit. The main task for long-term trading is the correct choice of a tool that will demonstrate unidirectional movement for a long time. Therefore, profit goals are measured by several hundred points. Since the foreign exchange market is often quite unstable and the price of the instrument can go quietly in both directions for several months, the “long-term type of trading” or as it is also called “positional” is often used in the stock market. From a technical point of view, positional trading is the simplest, but it requires very serious analysis to assess the potential of the movement of the instrument. Also, one of the drawbacks of positional trading is that this type of trading requires a solid deposit, to pay swaps and maintain a significant level of possible draw-down.

If you want to learn more about all types of trading, based on the duration of the transaction, pass training courses with the specialists of the Ester Holdings Inc. Company and build your successful strategy for making a profit.

Alexander Sivtsov