When most people think of currency trading, they picture it as a short-term activity where traders make money from day trades. But this gives the wrong impression of forex trading as a way to get rich quick, and ultimately, holding a position long-term may prove to be more profitable than a series of short-term trades. There is no widely-accepted definition but generally, long-term trades are those that last several weeks or months.
One of the main advantages of long-term trading is you aren’t required to find new opportunities every day. Finding good trades is the hardest aspect of trading because no-one knows how price will develop in the future. There will always be losing trades – our success relies on our winners making more money than our losers lose. When trading long term we can stick with the winners – rather than cash out and have to look for a new opportunity. Every year there are a few good trends across the asset classes. Once we find them we need to stick with them as long as we can – and extract as much from the trend as we can.
An advantage to position trading the forex market is the length of time required to trade. It is not required that you sit at your computer every day. Even if you have a full-time job finding the time to place a trade would not be an issue, and keeping up with your trades requires only minutes per week as long as the underlying fundamentals remain the same. For this reason, long-term trading is uniquely fitted for the investor with a day job or otherwise busy schedule.
It is difficult and impractical to use fundamental analysis in short-term trading where the course of a trade is a few hours, or at most, days. Thus, short-term traders are usually limited to using technical strategies for analysis and strategies. Long-term traders, on the other hand, can choose to focus on fundamental or technical approaches while formulating their strategies, and the added dimension of flexibility does translate to greater insight and better profits in due time.
The forex market changes instantly. Every day, over five trillion dollars change hands around the world. To speculate on those moves, one needs a strategy. A strategy to avoid the daily swings that take you out. Position trading is the answer. It helps traders avoiding daily market swings. And, high-frequency trading effects won’t matter anymore. These are only some of the advantages presented by long-term trading strategies. However, traders can find others along the same lines.