With so many different trading strategies and ways to bear fruit in the financial market, the greatest financial return for the majority of investors comes with medium-term trading strategies. While scalpers try to open positions on the spur of the moment and sometimes even on impulse, long-term trading may require months or years to close a particular deal.
This is where medium-term trading appears to be the "golden mean", so to speak. The strategy considers participating in daily and weekly moves that are less time-consuming if compared to long-term tactics and more profitable than scalping.
Of course, medium-term Forex trading is not the Wholly Grail that guarantees to win each and every deal. Besides, trend moves may take some time and perform not as often as we want them to perform. Also, the strategy comes with a certain risk. Nevertheless, it still delivers potentially strong trading conditions as well as plenty of room on the stop loss.
What is so special about medium-term Forex trading? Why is it considered one of the best strategies for both beginners and experienced pros? What crucial issues are to consider when opting for this particular approach?
What Medium-Trading Is and How It Works
The term speaks for itself. Medium trading means holding a position for a medium period. It may range from a few days to several weeks. What makes this strategy so special is that it requires less initial capital to trade if compared with short and long-term approaches. This is why medium trading is considered as the best option for newbies.
The main downside here is that such tactics ensure fewer trading opportunities. Besides, a trader is supposed to have a solid technical background as well as the ability to conduct in-depth market research and analysis. Learning some baseline aspects of Technical Analysis can be enough but only for a start.
How It Works
The concept is pretty simple. A trader needs to monitor trends within several timeframes. Additionally, you have to use a variety of financial indicators to compare and contrast the movement over a specific period.
In this image you can see where Support and Resistance levels are.
This is where moving average or stochastic may come in handy. Moreover, here are some other Forex indicators that you might need:
- Support and Resistance Levels;
- Trend Lines;
- Fibonacci Retracement and Extensions;
- Pivot Points and Candlesticks.
Your ability to analyze those charts and indicators will eventually define the ability to generate profitable trend ideas.
Medium-Trading Example: let's say, you identify the inverse head and shoulder pattern with the help of the hourly chart. At the same time, stochastics moves upwards to make the crossover in the area with an overselling environment. What would you do? A good idea is to enter the market with an order placed above the neckline resistance.
As a rule, medium traders place exit points at key levels as well as around psychological and support and resistance levels. Above all, you also need to follow the latest economic news and reports, as vital tools to modify and customize your current trading tactics.