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.
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.