Medium-Term Directional Forex Trading

Short-term, high-frequency day trading is but a blink in the forex market. However, medium-term directional trading isn’t much longer. For medium-term traders, a position is usually held for periods of a few hours to a day or two. Just as with short-term trading, the distinguishing factor of medium-term trading isn’t the length of time but the amount of pips sought after or risked.

Short-term traders aren’t focused on the big picture of the market. On the other hand, medium-term traders attempt to sense the overall direction of the market and to profit from more drastic currency rate fluctuations. As it’s well-known, the forex market hardly moves in one direction for very long, medium-term traders must be skilled at rapid trade entries and exits.

Medium-term directional trading is also known as “momentum trading” and “swing trading.” There are a variety of strategies used for putting medium-trading principles into practice.

  • Trading Events and Data

Traders use the expected outcomes of events as indicators of when to open and close positions. They will open a position well in advance of events and close a position without knowing the event’s outcome. This is also known as buy the rumor/sell the fact and vice versa.

  • Trading with the Flow

Traders seek out the overall market direction (trend) and follow the flows or basic information of major buying and selling.

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  • Trading a View

Traders base these trades on market themes like interest-rates or economic growth. Although they develop a fundamental opinion on which direction they predict a currency pair to take, they must also involve technical levels to this strategy to ensure the best outcome.

  • Trading the Technicals

Traders focus on their charts, trend lines, support and resistance levels and momentum studies before making a trade. This is the flip-side of trading a view. An awareness of fundamental events along with the technicals will create a more well-rounded trade.