How long should one hold a forex trading position? This article will help you identify the type of forex trader you are as well as the time frame that is suitable for you.
February 10, 2019 | AtoZ Markets - How long can a trader hold a forex trading position? While this is one of the frequently asked questions by most people, it simply shows that they don’t have a working trading strategy. A complete trading process requires the entry and the exit strategy.
Positions in the Forex market are opened with the aim of obtaining profit and the duration a position is opened depends on the desire of a trader and a margin. In other words, the trader decides for himself - with his exit strategy - how long his position will be open.
What makes a trader profitable in forex is their ability to make more money than they lose. According to George Soros:
It’s not whether you’re right or wrong that’s important, it’s how much money you make when you’re right and how much you lose when you’re wrong.
Therefore, without the aforementioned strategy, you'd be waiting for a disaster to happen, as you'd be emotionally tossed around by the market. Moreover, a trader should consider swaps when entering a position. Swap refers to the fee for moving positions overnight. While they may be negative, they can as well be positive and bring some extra profit.
Types of Forex Traders and Suitable Time Frame
Timing is always a major factor for consideration when participating in the foreign exchange market and this is almost always ignored by beginning traders.
So what type of forex trader are you? While the FX market provides several opportunities for various types of traders, the duration of a position - depending on the chosen trading style - can vary from several minutes to several days.
Depending on their chosen time period, all forex traders can be classified into four main categories; the scalpers, day traders, swing traders and position traders.
This type of traders are definitely the most speculative and frantic figure of the FX market. Scalpers operate with a very short time frame, in the order of a few minutes or seconds per transaction. Their main objective? To obtain very small profits as many times as they can during the busiest times of the day.
These are traders who deal exclusively during the day and ensure all open trades are closed by the end of the day as they do not hold their trades overnight. All transactions carried out by such market participants usually last in the range from a few minutes to several hours as they prefer not to work beyond 4-hour charts.
These forex market participants like to hold on to trades for several days at a time, but less than a week, as they seek to make profits from those sudden market movements. Swing traders rely mainly on technical analysis methods while trying to spot an entry point that will be located close to the support level.
These are traders who have a very long time horizons. They hold on to trades that last for many weeks, months, or even years in some cases. They take advantage of global trends by keeping a tab on fundamental factors to analyze the market and also make their trading decisions based on them.
Regardless of what trading style you choose, you have to make sure that it truly fits your trading plan and personality. When you are not consistent with your forex trading style, it can lead to the loss of your money.
However, if you do not have enough experience in the forex market, AtoZMarkets advises you to practice on Demo account as it eliminates the risk of making an emotional decision.
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