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Trends rule the forex market. Every trader loves a good, strong trend. As traders, many of us want to make quick profits. Who would not do that? The problem is that if we only focus on making quick profits we often overlook a much more profitable strategy that is the long term trend.

First, let’s discuss the anatomy of a short-term trade. A short term trade can take anywhere from less than a minute to around 20 minutes if you are really lucky. A 20 minute trade should generate huge profits. These are the unusual trades and the 1 to 5 minute trade is more common in day trading. As a trader, you have to decide in a split second whether you want to take a short-term trade.

When entering a short-term trade, an accomplished trader sets both exit points, profit and stop-loss. Most traders, however, set a stop loss but not a target for profit and leave the exit to their discretion and often to luck. When trading in the short term, set your exit points before entering the trade. You can adjust them at any time during the course of trading but protect yourself from sudden reversals and changes in market sentiment.

Long-term Forex trading is often overlooked and even frowned upon by many traders. For one reason or another, most forex traders believe that most of the money is made from scalping the market and that holding positions overnight is not a good strategy. Well … that assumption is wrong. The forex market is very similar to the stock market in this regard and those who trade long-term charts, whether using a daily or weekly chart, have a better chance of making incredible profits.

The reason for this is that, barring exceptional events, currencies make their big gains and losses over extended periods of time rather than 30 minutes. If you look at the long chart of a currency pair, you will find that if you had traded the long term chart, you would be maximizing your profits. That’s because, instead of just making small daily profits on a trending currency, you’d ride the trend for days, weeks, and sometimes even months. I ask, where do you see the chance of bigger profits?

I agree that the long term chart offers a better chance of maximizing your profits, but it takes discipline and a revision of your thinking to stay in a trade for a much longer period of time.

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Source by Luis Nieves