Medium-Term Trading

Medium-term trading is an often overlooked but potentially lucrative time frame for savvy traders. In this guide, we list the best instruments for medium-term trading, alongside definitions, popular strategies, and tips on navigating this time frame. Our experts have also reviewed and ranked the top brokers for medium-term trading in 2024:

Best Brokers For Medium-Term Trading

#1
Forex.com
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#2
Interactive Brokers

What Is Medium-Term Trading?

So, how long is the medium-term when it comes to online trading?

Definitions vary, and what is medium-term in the stock market is not always the same as what is considered medium-term in other markets and trading vehicles, such as binary options or bonds.

However, a sensible definition of medium-term is a trade that is open for between several days and a few months.

This excludes popular approaches, such as a 2-minutes or 3-minutes day trading and scalping strategy. On the other end of this time scale, strategies in real estate and most fundamental or “value” trades in the stock market will exceed the medium-term cut-off.

Best Medium-Term Trading Instruments

While most trading instruments are theoretically available for medium-term trading, some investment vehicles and markets are better suited to this time frame:

Stocks

As one of the easiest and most versatile trading vehicles, spot equities are well-suited to short, long and medium-term trading.

Stocks boast high liquidity, simplicity and an abundance of global markets to choose from. Trading shares is also highly accessible through a range of online brokers.

There are plenty of medium-term stock trading strategies to base your approach on, and the risk is arguably lower than with leveraged derivatives.

Medium-term trading opportunities are also plentiful due to the mix of fundamental, economic and performance-based price determinants in the stock market.

ETFs

Exchange-traded funds, or ETFs, are another versatile trading vehicle. They track the performance of themed collections of stocks, commodities, cryptocurrencies or other assets.

With thousands of funds available, ETFs are a relatively low-cost, low-risk and accessible form of investment for medium-term trading.

ETFs are also better suited to medium-term trading than mutual funds meaning they can be bought and sold at any time during the trading day.

Futures

Another popular medium-term trading instrument is futures. Futures are dated contracts that lock in asset prices months or even years in advance of their expiration date. Common futures markets include commodities, indices, stocks and currencies.

While not as accessible, or beginner-friendly as stocks and ETFs, futures offer advantages such as leverage and heightened sensitivity to market stimuli. Futures are also highly liquid with an extensive range of commodity assets available.

Options

Our final medium-term trading instrument is options. Options are contracts that allow investors to purchase or sell various trading assets such as stocks or metals, or instead opt for the cash equivalent of their trading profits or losses.

While long-term trading with options can be expensive due to a phenomenon known as “theta decay”, medium-term trading is less affected by this.

Other Trading Vehicles

There are several alternative instruments that, although are less suited to this time frame, can be profitably traded in the medium-term:

Forex & CFDs

When forex or CFD trading, investors may be tempted to let a profitable trade run into the medium-term for extra gains. However, swap fees for maintaining positions overnight can soon add up and eat into profits.

For this reason, medium-term forex trading strategies are less popular.

Crypto

While mid-term cryptocurrency trading can be lucrative, this is a less suitable time frame for this market.

Short-term trading allows investors to take advantage of the renowned volatility of digital currencies while investing based on crypto staking or fundamentals is best suited to long-term trading.

Bonds

Bonds are primarily used as assets to add stability and diversification to a portfolio rather than as medium-term trading instruments.

Binary Options

Most binary options brokers offer short-term contracts that span minutes and hours. There is a limited list of trading platforms where you can buy binaries that last weeks or months.

As a result, binary options are best suited to a shorter trading time frame.

Fees & Commissions

The implications in terms of fees when trading in the medium-term differs significantly based on the type of instrument.

For example, medium-term CFD trading will incur substantial swap fees for holding positions over multiple weeks or even months.

However, for assets such as cryptos, stocks and ETFs, many brokers charge a commission or flat charge for every purchase and sale. In this instance, focussing on medium-term crypto or share trading will reduce fees compared to more frequent shorter trades, but charges will be higher than with longer investments.

Pros Of Medium-Term Trading

Cons Of Medium-Term Trading

Medium-Term Trading Strategies

Looking for trading strategies on how to pick stocks or other assets for medium-term trading? Here is a list of ideas for medium-term swing trading:

Rumour Trading

News is one of the driving forces of asset prices across many markets. And while the high short-term volatility of breaking news is often thought of as the most potent, trading based on rumours can lead to medium-term trading opportunities.

Traders can create medium-term stock trading strategies based on rumours such as impending employee layoffs, company takeovers, dividend raises and share buybacks. Heightened global or regional political tensions can also be a trading signal, with the escalation of these tensions causing massive market changes such as the increase in 2022 commodity prices caused by the Russia-Ukraine conflict.

Mean Reversion

Mean reversion trading involves purchasing an asset or security that has deviated in the short term from its historical market average. Investors then bet the asset will return to its historical trend line in the medium-term once the short-term volatility passes.

Momentum

However, if an investor believes that the cause of a short-term fluctuation has longer-term implications, they can make a medium-term trade based on this momentum.

An example of this would be an overperformance of earnings predictions for a company. This will have a short-term effect, but if this is due to a sustainable positive change in business practice, a stock may experience further medium-term growth after this initial increase.

Overbought & Oversold

Trading assets that are overbought or oversold relies more on technical analysis than fundamentals or news.

Investors can use indicators such as the relative strength index (RSI) or stochastic tools to create signals for these situations.

Tips & Tricks

Final Word On Medium-Term Trading

There are multiple medium-term trading strategies available when investing between several days and a few months. However, this time frame can be seen as an in-between phase, with neither the volatility of the short-term nor the compounding and dividend potential of the long-term.

Head to our ranking of the top medium-term trading brokers to get started.

FAQs

How Long Is Medium-Term Trading?

What is medium-term in the stock market is not the same as other markets and instruments like real estate or binary options. However, a period of days and months can be considered medium-term when online trading. This time frame is also commonly referred to as swing trading.

What Are The Best Medium-Term Trading Strategies?

Popular medium-term trading strategies include mean reversion, momentum trading and rumour-to-news investing. For more details on each approach, see our full guide to medium-term trading.

Is Mid-Term Swing Trading Possible?

Trades in the medium-term are often classed as swing trades, as these positions are held longer than day trades but shorter than long-term investments.

Swing trades can be made on multiple markets, from stocks to commodities and cryptos. There are also a variety of strategies that can be applied, from trading on momentum to mean reversion.

How Should I Choose A Broker For Medium-Term Trading?

The best brokers for medium-term trading will offer suitable investment vehicles such as spot stocks, ETFs, futures and options. Commission fees will also be low and they will provide access to a reliable trading platform and mobile app, such as MetaTrader 4. Also check that the firm is regulated by a trusted financial agency, such as the UK FCA or the US SEC.