Long-term Forex trading. The secret of stable profits

Many traders, having gained sufficient experience and gained some success in intraday trading, sooner or later begin to think about long-term or medium-term trading.

In fact, there is simply a huge myth surrounding scalping and intraday trading about the profitability of this approach.

Most beginners mistakenly believe that by devoting more time to trading, you will somehow miraculously earn more.

Unfortunately, this approach is fundamentally wrong and has been hammered into us since the era of the Soviet Union.

For example, in the past, people who performed more than the norm in production were strongly encouraged, rewarded, and newspapers wrote about them.

Actually, what to talk about if the hero of the union was given for an overfulfilled shift in the extraction of some kind of mineral. Thus, throughout the post-Soviet space there are many people who are mistaken in thinking that in order to achieve success you need to work hard and hard.

Unfortunately, the modern world is built in a completely different way, and perhaps your neighbor, who goes to work twice a week, earns tens of times more than you by overworking your shift at the machine.

The stock exchange world, namely trading as a process or work, is no exception, and the banal idea that the more you are in the market and make more transactions, the more you will earn, is fundamentally wrong. 

To understand why long-term trading is popular among long-term investors and established traders, let's take a closer look at this concept.

Long-term forex trading. Advantages and disadvantages

To begin with, it is worth reminding our readers that long-term trading is a trading process in which holding a position is calculated for months, and entering the market is calculated on global price changes.

Long-term trading takes place on weekly or monthly charts, and the number of positions per instrument may not exceed five transactions. So, let's figure out why long-term trading is attractive.

Pros of long-term trading:

1) Predictability of markets

No matter what they say, market noise is a problem within a day trader.

If a trader works at small intervals, his main problem is market noise, due to which he very often places stop orders. If you look at the chart of the same instrument on a small and large time frame, it becomes obvious that on a higher time frame the trend looks more clear and has better outlines.

As an example, I suggest looking at the monthly and hourly charts and clearly understanding the real situation on the market:

 
2) Saving on the spread

A trader who trades intraday cannot even imagine how a broker can easily profit from it, having an average of three points per trade.

Do numbers of three points seem funny to you? Well then, let's do some simple math. On average, a trader makes from five to ten transactions per day, but we will take the minimum.

So, if you do the math, the intraday trader loses 15 points every day. This figure is 450 points per month, and 5,400 points per year. Now let's imagine that you have a small deposit and you are working with the smallest lot, where the point price is 10 cents.

As a result, working as a minimum lot, you lose at least $540 a year, which at today’s rate is almost two average salaries. A long-term trader pays only one spread on Forex when he opens a trade and does not lose anything extra.

3) Less time-consuming and less stressful on the emotional state

Unfortunately, many beginners are mistaken about the ease of making money on the stock exchange, and this is especially true for scalpers and day traders.

To be honest, on my way I have met a lot of traders who scalp every day and believe me, you simply cannot find more irritated, angrier and more unhappy than this category of traders. Just imagine what the emotional state of a person can be like, who spends the whole day either earning a penny or losing it, and at the end of the day can end up in a total loss.

Traders who trade long-term can spend just a couple of hours analyzing the market, open an order with a stop order and profit and forget about their transaction for months, looking once a week at the terminal to move the position without loss, and so on.

Flaws:

1) A large deposit is required.

Unfortunately, in order to make a profit of 2 thousand points, it is necessary to set a stop of at least 500 points, which requires a fairly substantial deposit from the trader in order to adhere to competent approaches to risk.

2) The size of the commission in the form of a swap

It is no secret that brokers charge you a commission in the form of a swap for holding a position the next day. For an intraday trader, a forex swap is nothing more than a formality, but if your position has been open for a couple of months or a year, it makes significant adjustments to your trading.

The secret of stable profits

The future success of a long-term trader primarily depends on the strategy he has chosen, as well as timely monitoring of the fundamental background, namely global macroeconomic indicators.

It is worth noting that to increase profitability, it is necessary to open transactions only in the direction of a positive swap and do not forget to hedge, creating complex positions reminiscent of tactics based on Keritrade, while not forgetting that the high correlation of Forex instruments with high positive swaps is an excellent long-term investment .