Here we will look at short term trading strategies in Forex what they are and whether or not you should use them so lets look at short term trading strategies in more detail.

There are three main terms used and they are the following:

Forex Day Trading

A Forex day trade can last normally for a few minutes to a few hours and the term day trading refers to the fact that trades are closed off within the day.

Forex Scalping

Forex scalping refers to a strategy whereby the trader only looks to make a small profits but at the same time, he aims to keep is risk low. He goes for quick regular profits and these scalped trades in theory help him to make a regular income and keep risk low at the same time.

High Frequency Trading HFT

High frequency trading or HFT, is really just another term for scalping but its emphasis is on speed, with trading algorithms designed to execute trades in less than a second and use this edge in speed, to take in small profits. As its name suggests, this strategy can open many trades within a day.

Should You Use Short Term Currency Trading Strategies?

In days gone by the floor trader had an advantage and could get the news before the bulk of traders but this advantage has now gone with the internet and instant price action being available to all. Volatility has increased and all volatility in short term time frames tends to be of a random nature – this means that any technical tools or trading systems apply, cannot get the odds on your side and sooner or later, your going to lose.

High Risk Low Reward

The myth of day trading or scalping is sold to the public as low risk high reward trading by vendors selling junk robots or so called Expert Advisor's. These systems though are extremely high risk – as stops are normally around 10 – 30 pips and they just get picked off by volatility. Profits aimed at are small, never cover losses and the trader gets wiped out.

I hear a lot about High frequency trading systems used by banks making money but think the truth is - they turn over a lot of commission for the broker. Can you name a bank Forex discretionary fund with profits over 5 years compounded which exceeds 20%? I can't think of one and its a myth big banks, brokerages or Hedge funds, make money for clients – most lose money.

Final Words

Forex scalping day trading or whatever you want to call, a short term trading strategy in Forex is a good way to lose money. The smart trader avoids short term trading systems and focuses on placing his trading signals longer term and makes a lot more money, with less risk and even better, this trader spends less time on his trading. If you want to enjoy big Forex profits, avoid short term trading and focus on the longer term.