IB/MIB Application

Profit From Long Term Trading

Some traders prefer to take a macro economic view to their trading. These traders hold there position for a long time which in the world of Forex is usually weeks or months. However some traders with a particularly long term view may hold the same position for years. Given the length of the holding period most of these investors are either hedge funds or other institutional investors. However there are some deep pocket investors who also have profited very well from long term bets.

Long term trading is also known as macro economic trading. This is because it bases its trades on long term macro economic trends. The reason that it is usually restricted to institutional investors is because of the volatility that is associated with currency trading. Even though your long term target maybe correct the short term volatility may force you to close your position before you can profit from it. If you are trading for the long term yourself you will want to make sure that you can withstand volatility of up to 5 percent or more. It is important that your long term position is small relative to your margin balance.

One of the most important criteria for any trader strategy is having the right psychological temperament. People with a short term mind set that are easily moved by changing market conditions make particularly bad long term traders. If you are holding a trade for weeks or months you will see plenty of news occur that you could never have expected. On the way to reach your predetermined target the currency can react with unexpected volatility. If you do not have a disciplined trading mind then it can be tempting to trade out of the position prematurely. Thus long term trading is only for the most patient and disciplined traders. It is also unappealing to traders who are attracted by the action of the market. Even if their long term strategy is sound these action junkies may be tempted to trade the position just because they want to do something. If you like to be part of the action then this will not be the strategy for you. It also requires the ability to be able to move back from the action in the market and evaluate. This is not about following the trend but rather deciding where you think the currency is heading based on your own research.

However there are some major advantages to long term trading. If you are trading long term positions you will often receive between 100-200 pips per position. A scalper usually only make 5 – 8 pips on a trade. This means less trading which also means less in commission payments. The commission payments associated with scalping can make it difficult to turn a profit. Also it can mean that your Forex trading is less time consuming. Once you have set up your trade unless there is a major shift in the trade parameters there is little for you to do except evaluate your next trading position.