forex long term trading

Forex Long Term Trading – 101 Guide

The notion of working two jobs is common among the middle and lower classes in society. This is because as inflation and the cost of living continue to rise, wages have struggled to keep up.

However, while some people work for as much as 16 hours a day just to pay the bills and mortgage, some have found smarter ways to augment their regular incomes.

Investing in the capital markets like forex can be an exciting option for those equipped with the skills. But still, to be able to count on trading as a reliable side hustle, it is important to come up with a long-term forex trading strategy.

Can You Trade Forex Long Term?

There is a misconception that forex trading is only for day traders, which essentially means short-term trading. Therefore, when you come across the subject of long-term forex trading, you are likely to wonder if this is possible in the first place.

The short answer to that question is yes. You can trade forex long-term. And we are not talking about a “carry trade”, where an investor buys a currency that is backed by higher interest rates in exchange for one whose central bank has chosen to keep the interest rates low.

Long-term forex trading is a strategy that involves keeping trades open for more than a day (overnight) or even over a weekend.

Also, before we get into much detail, it is important to describe two perplexing scenarios when trading forex long term.

You can trade forex for a long period, or you can use a long-term forex trading strategy. In the first scenario, you can be a day trader for several years, whereas in the second, you can use a long-term forex trading strategy for a few months.

The most accurate description of long-term forex trading comes from combining parts of the two scenarios. Keeping trades open for longer (overnight and over the weekend) before closing and remaining in the game for several years.

Why Trade Forex Long Term? 

There are two main reasons why you might want to trade forex long-term. The first one is because day trading is too volatile for you to make profits, while the second, is because your strategy focuses more on the fundamentals of the market rather than technical analysis.

But in general, trading forex long-term can be a lucrative way of supplementing your income. This is the primary goal of everyone who wants to trade forex long-term.

Can You Make Money Trading Forex Long Term?

The long-term forex trading strategy is starkly different from the short-term trading that most people are attracted to. The reason is that day trading or the short-term approach, usually provides quick profits and is done in a matter of minutes. Losses and profits in day trading are quick to come and go.  As a result, traders focus on volume trading rather than profit margins.

In forex long-term trading, you are in for the bigger game. You are not investing in getting a return within a few hours. Here, one trade can net you huge profits by simply keeping it open for several days. As a result, losses from a single trade can also be huge if left unmonitored.

The idea behind investing in forex long-term is that, over time, trades tend to recover from dips during a bull market. Therefore, you can profit more by leaving your trade open instead of closing it whenever the price dips in the short term.

In the chart above the euro (EUR) enjoyed a bullish run against the dollar (USD) between November 4, 2022, and January 25, 2023. Within that rally, there were several incidents when the dollar gained strength against the euro, resulting in a short-term pullback.

Why Should You Start A Forex Long-Term Trading Side Hustle?

Establishing a forex long-term trading strategy can be a smart way of earning supplemental income without taking a high risk in short-term trading. Here are a few benefits that can come out of long-term forex trading.

Low Stress And Risk 

As the positions in the long-term strategy are held for a long time, the trader does not have to deal with the day-to-day changes in the market. You don’t always have to be on top of the investments and trends in the market. The money is invested in a few long-term positions, so the daily volatility of the market does not have as huge of an impact on the profits as it would have on short-term trading. This keeps stress levels low. 

Moreover, it is easier to gauge the market trends and predict the changes in the long term as compared to evaluating the market daily. In this way, you can monitor and control the long-term positions in a better way. The overall risk is reduced as your investment is spread out in different long-term positions.

Better Profits 

In forex long-term trading, the investment is usually bigger than in day trading. If you’re going for 200 pips in short-term trading, you will probably need to invest a lot more to achieve that, thus increasing risk exposure. However, with a long-term approach, a single trade could earn you 200 pips. Take a look at the example below. 

In the daily chart above, a single candlestick represents one daily trading session. As illustrated, if you traded the EUR/USD currency pair on the 4th of November last year and closed the trade at the end of the day, you would have made 200 pips.

However, leaving the trade open to close on the 2nd of December would have earned you 814 pips.

Requires Less Time Investment 

In forex long-term trading, you don’t have to spend long hours online trying to figure out the market trends for the next day or the same day. Since day trading is a daily process, it requires more time to look at technical analysis.

On the other hand, long-term forex trading relies more on market trends that are backed by fundamentals and economic reports. So, investing in forex long-term trading can save you a lot of time. 

How Does the Long-term Strategy Work? 

There is no one solid method or process by which the long-term trading strategy works. However, long-term forex trading involves identifying an upcoming market trend and chasing it to see where it goes and how it performs in the following days. 

The chase may go on for weeks and months, sometimes over a year. However, it doesn’t mean that the position has to open for a while to be classified under the long-term strategy. A position held for more than one day can also be a long-term investment depending on the situation. 

One important thing to keep in mind is to always be open to closing a losing trade in the event your initial analysis of the market changes due to an unforeseen event. 

Tips For Long-term Forex Trading

Although long-term forex trading is a relatively more cautious approach to investing in forex, there are some similarities with short-term trading that investors should be aware of.

  • Just like in day trading, long-term forex trading requires patience. Because you are in the market for the long term, the last thing you want to do is start closing trades every time they experience a pullback. 
  • Be wary of rollover costs. You can keep forex swap fees low by reducing the amount you invest per trade. Because you are trading forex long-term, there is no need to commit too much to a single trade in search of more profits. Leave that to short-term traders.
  • Diversify your positions. The future is always unpredictable, which is why investing $1,000 in five trades is better than committing the whole amount to a single trade. 
  • Don’t be scared to close a position earlier. This is only advisable if there is a fundamental change in the market that affects your strategy, like an unexpected interest rate cut or hike, an economic stimulus package announcement, or geopolitical issues that could result in a lower supply of a commodity like crude oil.
  • Review your strategy regularly. Because you are not day trading, it is imperative to regularly reassess your trading strategy to see if it is still applicable in the prevailing market conditions.

Signals For Long-term Forex Trading

Forex trading signals are trading instructions sent to subscribers of a forex trading signal service to capitalize on opportunities as they arise.

Generally, a forex signal is made up of a currency pair, a buy/sell signal, and a time frame before which a trader should open a position. Some signals also go as far as guiding stop loss and take-profit limits. The signals work best when applied to long-term forex trading. 

As a long-term trader, you can choose from multiple trading signal options. For example, there are forex signals available for the MetaTrader 4 platforms. Here you can evaluate the performance of your forex signal using the extensive data and the analysis system on the platform. There are also independent signal service providers, although a lot of them cannot be relied on. 

Using Trade Copying Software To Make More Profits

If you plan to make long-term forex trading more than just a side hustle, you will need to acquire some expert knowledge and build forex trading experience over a long period. However, if that sounds too cumbersome for you, there are alternative routes that shorten the journey.

Trade copiers are forex trading systems that allow traders to copy the trades of expert traders. Therefore, if you feel that you don’t have the best long-term forex trading strategy in place, you can always opt for a trading system.

Telegram.Forex is one of the best long-term forex trading systems. The trade copier and signal service app allow users to copy the trades of others on MetaTrader 4. This software can automate your trading so that the required action is taken as soon as the markets are open and meet the conditions.

The tool also helps you find the best signal providers for long-term forex trading strategies, providing a scoring system that ranks signal service providers.

Besides automating your trade actions, you can see the performance and have a clear view of the data showing what needs to be changed if things are not working according to plan.

You can find out more about this forex signals and trade copier app by visiting Telegram. Forex.

Final Thoughts 

In summary, you can make money trading forex long-term because there is evidence for that. The likes of George Soros made a fortune trading forex.

But what many do not know is the time dedicated to developing a working strategy that delivers long-term success. For your sake, you may not need to go through all that process, thanks to advances in technology and trading systems that can now be used to make money trading forex long term.