Long term forex trading is akin to investing. Unlike scalping or swing trading, long term forex trading sees traders, as well as forex robots, focus on making fewer transactions that end up producing larger individual gains. Forex traders or expert advisors deploying this strategy strive to make at least 200 pips per trade. In this case, their opportunities are far more limited.
Long term trading entails identifying a long term trend, opening trade, and staying with the trend until it reverses. In this case, trades are opened and left to run for weeks, months, or even years until a given target is attained.
Given the reduced number of trades opened, traders as well as automated trading tools are able to avoid noises that many at times lead to loss making trades. When it comes to long term forex trading, traders open positions based on expectation and close them based on facts.
How to develop a long term forex Trading Strategy
Step 1: Look at Monthly and Weekly Charts
Traders as well as FX Expert Advisors engaged in long term trading strategy pay close watch to monthly and weekly charts. Long term charts are known to filter noise with high levels of accuracy, therefore making it possible to identify profitable trading opportunities.
By focusing on weekly and monthly charts, it becomes much easier to identify the underlying long term trend, either downtrend or uptrend. Such charts also make it possible to identify support and resistance levels that many, at times, provide crucial information when it comes to entry and exit points in the market.
Step 2: Use Of Indicators
Upon paying close watch to weekly and monthly charts, identifying market momentum would be the next step as part of any long term trading strategy. Oscillators are some of the best forex trading indicators that simplify the process of identifying the strength of an underlying long term trend.
Relative Strength Index and the stochastic indicator are some of the best oscillator indicators for identifying key points in the market, ideal for opening and closing positions. The two indicators are best known for identifying oversold and overbought conditions, which many at times provide ideal entry points.
Step 3: Look for Candlesticks to Confirm entry and exit points.
Candlestick patterns are some of the best forex charting tools and important money-making hacks when it comes to technical analysis. Once an underlying trend has been identified using the weekly and monthly charts as well as indicators, candlesticks patterns come in handy in identifying ideal entry points.
For instance, if the price is moving lower and reaches a point where oscillator indicators signal oversold conditions, it would be wise to study candlestick patterns to identify potentially oversold conditions.
Engulfing candlestick patterns are some of the best chart patterns that professional traders use when making decisions on entry and exit points. The emergence of an engulfing
Bullish engulfing candlestick pattern in oversold market conditions, will many at times signal that price has reversed and likely to continue edging higher.
Similarly, the emergence of a bearish engulfing candlestick pattern in an uptrend where oscillator indicators signal overbought conditions will many at times imply that price has reversed and set to continue edging lower.
Long Term Forex Trading Strategy For success
Trend trading is one of the most effective long term forex trading strategies known to generate significant returns. The strategy sees traders as well as automated FX trading systems focusing on long term trends. Long term moving averages such as the 200 day Simple Moving Average is often used to identify long term trends.
Whenever the price of an underlying asset understudy is above the 200D SMA, then it is considered to be in an uptrend. In this case, traders or FX EA for automated trading open long positions and leave them open as long as the price is above the 200-D SMA. The position is only closed whenever price moves and closes below the long term moving average, signaling an end to the long term uptrend.
Similarly, traders, as well as Algorithmic FX trading systems, open short positions whenever price moves and closes below the 200 SMA. By closing below the 200 SMA, the same is interpreted as the commencement of a downtrend, with the price expected to continue edging lower. The position is only closed once price reverses and closes above the 200 SMA.
Long term forex trading strategies are some of the most overlooked trading strategies, yet the most profitable. The strategy encourages the opening and letting positions run for weeks, months, or even years. Long term trading can be profitable if not more profitable compared to short term trading strategies. One long term position can end up yielding more profits than hundreds of positions opened over a given period.