If you’ve spent any time reading about forex, you’ve probably seen people arguing about timeframes. Some traders proudly hold a trade for months. Others are in and out in under five minutes. So which one is right for you? That brings us to the big question of this lesson: what is a long term forex trading system and how does it differ from short term trading?
Don’t worry if the jargon feels a bit overwhelming right now. Everyone starts somewhere, and I promise this is far simpler than it first looks. Think of it like choosing between a marathon and a sprint. Both are running, but they need different training, different kit and a different mindset.
In this guide, I’ll walk you through what each approach actually means, show you worked examples with real numbers, and point out the traps beginners often fall into. By the end, you’ll understand why your choice of timeframe matters so much, and you’ll have a clear set of next steps to help you decide which style suits your life, your budget and your personality.
Table of Contents
- What Is a Long Term Forex Trading System?
- What Counts as Short Term Trading?
- Long Term vs Short Term Trading: The Key Differences
- A Walkthrough Example: Same Pair, Two Traders
- How to Choose the Right Style for You
- What to Be Careful Of
- Frequently Asked Questions
What Is a Long Term Forex Trading System?
A long term forex trading system is a set of rules for entering and exiting trades that you plan to hold for weeks, months or sometimes even years. Many traders call this position trading. The idea is to catch big, slow-moving trends rather than tiny day-to-day wiggles.
The word “system” is important here. A system isn’t just a hunch that the euro will go up. It’s a written plan that answers clear questions, such as:
- What makes me enter a trade? For example, price closing above its 200-day moving average.
- Where do I admit I’m wrong? This is your stop-loss level.
- When do I take profit? This might be a fixed target or a trailing stop.
- How much do I risk on each trade? Many traders risk 1–2% of their account per trade.
Long term traders usually look at daily, weekly or even monthly charts. They often pay attention to the “big picture” too, such as interest rate decisions from central banks, inflation trends and the general health of an economy. If you’d like a deeper definition, Investopedia has a helpful overview of what a position trader does.
Here’s a simple way to picture it. Imagine watching the tide come in at the beach. Each wave rushes up and drags back, but over a few hours the water level clearly rises. A long term trader ignores the individual waves and focuses on the tide.
What Counts as Short Term Trading?
Short term trading is the opposite end of the scale. Instead of riding the tide, short term traders try to profit from the individual waves. Trades might last a few seconds, a few hours or a few days at most.
There are three main short term styles you’ll hear about, so let’s break them down.
Scalping
Scalpers hold trades for seconds to minutes, aiming for just a handful of pips each time. They might take dozens of trades in a single session. It’s fast, intense and needs a lot of concentration.
Day Trading
Day traders open and close their trades within the same day. They typically use 5-minute, 15-minute or 1-hour charts. Because they close everything before the day ends, they avoid overnight holding costs.
Swing Trading
Swing traders hold positions for a few days, sometimes a couple of weeks. They sit somewhere in the middle, so you’ll sometimes see swing trading described as “medium term”. It’s a popular choice for people with full-time jobs.
The forex market is enormous, which is partly why all these styles can exist side by side. According to the Bank for International Settlements Triennial Survey, global forex turnover averaged around $7.5 trillion per day in April 2022. With that much activity, there’s room for scalpers and long term investors alike.
Long Term vs Short Term Trading: The Key Differences
Now we get to the heart of it. A long term forex trading system and a short term approach differ in far more than just how long you hold a trade. Here’s a side-by-side breakdown.
- Time on the screen. Long term traders might check charts once a day or even once a week. Short term traders often need to watch the market for hours.
- Number of trades. A position trader might place 10–30 trades a year. A scalper could place that many in a single morning.
- Size of the stop-loss. Long term trades need wider stops, often 150–500 pips, because price swings around a lot over weeks. Short term trades might use stops of 5–30 pips.
- Position size. Because the stops are wider, long term traders use smaller position sizes to keep the risk the same.
- Costs. Short term traders pay the spread on every trade, so costs add up quickly. Long term traders pay fewer spreads but may pay (or receive) overnight swap fees.
- What drives decisions. Long term traders often weigh up economic fundamentals. Short term traders lean more heavily on technical analysis and price action.
- Emotional pressure. Short term trading is quick-fire and can feel stressful. Long term trading needs patience, because you’ll sit through weeks where your trade goes nowhere.
Neither style is “better”. They’re simply different tools. A hammer isn’t better than a screwdriver; it depends on the job and on who’s holding it.
A Walkthrough Example: Same Pair, Two Traders
Let’s make this real with an example. Meet Priya and Tom. They both have a $2,000 account, both trade EUR/USD, and both follow the sensible rule of risking no more than 2% (that’s $40) on any single trade.
Priya, the long term trader
Priya notices that EUR/USD has closed above its 200-day moving average on the weekly chart. Her system tells her to buy, with a stop-loss 200 pips below her entry.
- Risk allowed: $40
- Stop-loss: 200 pips
- So each pip can be worth: $40 ÷ 200 = $0.20 per pip
- That’s 2 micro lots (a micro lot is worth roughly $0.10 per pip on EUR/USD).
Over the next three months the trend continues and she exits 600 pips higher. That’s 600 × $0.20 = $120 profit. She checked her charts for about ten minutes each evening.
Tom, the short term trader
Tom day trades the same pair on a 15-minute chart. His stop-loss is just 20 pips.
- Risk allowed: $40
- Stop-loss: 20 pips
- So each pip can be worth: $40 ÷ 20 = $2.00 per pip (20 micro lots)
He aims for 40 pips per winning trade, which would make $80. However, if his broker’s spread is 1 pip, that costs him $2 on every single trade. Over 100 trades a year, that’s around $200 in spread alone. Priya, with roughly 15 trades a year at 0.2 of the size, pays a tiny fraction of that.
Notice what happened here. Both traders risked exactly the same $40. The difference was in how they spread that risk: Priya used a small position with lots of breathing room, while Tom used a bigger position with a tight leash. This is one of the most important lessons in forex, so it’s worth reading that example twice!
How to Choose the Right Style for You
Choosing a trading style is a bit like choosing a hobby. The best one is the one you’ll actually stick with. Let’s walk through it step by step.
- Look honestly at your free time. If you work 9 to 5 and have a family, scalping during the London session probably isn’t realistic. Long term or swing trading fits around a busy life much better.
- Think about your temperament. Do you enjoy quick decisions, or do you prefer to think things through? Impatient people often struggle with long term trades, while anxious people often struggle with scalping.
- Check your account size. Long term trading needs wide stops, so make sure your broker offers micro lots (or smaller) to keep your risk sensible.
- Consider costs. Compare your broker’s spreads and swap rates. High spreads hurt short term traders most; high swap rates hurt long term traders most.
- Test it on a demo account. Try your chosen style for at least a couple of months before risking real money.
The benefits of a long term approach for beginners
I’ll be honest: I often nudge beginners towards longer timeframes first. Here’s why:
- You have more time to think, so you make fewer rushed mistakes.
- Daily and weekly charts contain less random “noise”.
- You pay fewer spreads overall.
- It doesn’t take over your evenings or your sleep.
That said, the downside is that you’ll get fewer trades to learn from, and your progress will feel slower. That’s completely normal. Slow and steady really does count for something here.
What to Be Careful Of
Every trading style has its own traps. Knowing about them in advance is half the battle, so here are the big ones.
Long term pitfalls
- Swap fees. Holding a trade overnight can cost (or earn) you a small fee each day. Over several months, these can add up to a surprising amount.
- Over-sizing. Beginners sometimes use a 200-pip stop with a position meant for a 20-pip stop. That turns a 2% risk into a 20% risk. Always do the maths!
- Boredom. When nothing happens for weeks, it’s tempting to fiddle with a perfectly good trade. Resist the urge.
Short term pitfalls
- Overtrading. More trades doesn’t mean more profit. It often just means more costs.
- Slippage. In fast markets, your order may fill a few pips away from where you wanted, which matters a lot when you’re only aiming for 10 pips.
- Emotional burnout. Staring at a screen for hours is tiring, and tired traders make poor decisions.
Above all, remember that leveraged trading carries real risk for every style. Regulators require brokers to publish how many of their retail clients lose money, and the figures are often well over half. That’s not meant to scare you off. It’s simply a reason to learn properly, start small and protect your capital.
Questions to ask yourself next
Once you’ve got the basics, here are some great questions to explore further:
- How much does my broker charge in swap for holding EUR/USD overnight?
- How would my system have performed over the last five years if I’d backtested it?
- What is my maximum drawdown, and could I cope with it emotionally?
- Does a mix of styles (say, swing trading plus one long term position) suit me?
Frequently Asked Questions
Is long term forex trading more profitable than short term trading?
Not automatically. Profitability depends on your system, your discipline and your costs, not just your timeframe. Long term trading tends to suit beginners because it’s slower and cheaper in spreads, but it still needs a tested plan.
How much money do I need to start long term forex trading?
There’s no fixed amount, but because stops are wide, you need a broker offering micro or nano lots so you can keep risk to 1–2% per trade. Many people start practising on a demo account for free.
What is the difference between swing trading and position trading?
Swing trading usually holds trades for a few days to a couple of weeks. Position trading, the classic long term style, holds trades for weeks to months and focuses on major trends.
Do long term traders pay swap fees?
Yes, usually. Any trade held past the daily rollover time is charged or credited a swap, depending on the interest rate difference between the two currencies. Always check your broker’s swap rates before holding a trade for a long time.
Can I use both long term and short term trading?
You can, but it’s wise to master one style first. Mixing styles too early often leads to confusion, such as turning a losing day trade into an unplanned “long term” trade.
Wrapping Up
So, what is a long term forex trading system and how does it differ from short term trading? In short, a long term system follows clear rules to catch big trends over weeks or months, using wide stops and small positions. Short term trading aims to profit from quick moves using tight stops, bigger positions and lots more screen time.
Both can work, and neither is a shortcut to easy money. The right choice depends on your time, your temperament and your budget. My advice? Pick one style, write down your rules, and test them on a demo account for at least two months. Keep a simple trading journal as you go. You’ll be amazed how much you learn about the market, and about yourself!