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Definition: Short-term Trading

Short-term trading, also known as “swing trading,” involves the opening and closing of a financial position (stocks, futures, currencies, options, etc.) throughout a period of time that can last more than 24 hours.

This is different than day trading where a position is closed before the day is over. Swing traders usually hold a positing for a few days, but it is not uncommon for trades to last a few weeks or months.

Short-term and day trading strategies can be similar, but the allowance for losses and profits for a swing trading system are larger.

Even though short-term trading can be done with stocks, the fact that the stock market is not opened 24 hours a day increases the risk of experiencing an uncontrolled loss during inaccessible market hours.

Forex or FX trading, on the other hand, does not have this problem because the currency market is a 24-hour market, opened from Sunday afternoon to Friday afternoon (Eastern time). This provides the swing trader with a greater degree of flexibility in designing and implementing a strategy.

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