How to trade long term forex strategy and How to Plan an Effective Long-Term Forex Trading Strategy in 2020?
In the world of forex, it would be essential to have different types of trading strategies for the short term. Along with it, long term planning is equally essential. With the forex trading strategy for the long run, you aim towards larger prospective profits with even little amount of capital investments. Also, these wouldn’t translate to premature stop losses, unlike trade approaches that are short term.
Making an efficient trading strategy for the long term
Recently we created article Forex Weekly Strategy.Traders need general advice about How to Plan an Effective Long-Term Forex Trading Strategy because trading rules are not only important things. Traders need to see bigger picture.
It’s better to have a clearer picture of what you would like to have from the forex market. The target has to break down the following.
Fundamental analysis and long term system and COT report
The term would refer to proper tracking of the progress of commanding economy heights while are known as fundamentals that would go along with the aforementioned idea. Fundamentals would be things such as interest rates, employment, CPI along with politics.
While trading in the big picture, you would have to know about fundamentals for the involved currencies. It’s much better not to avoid interest rates when trading a bigger picture. Upon holding currency trade for higher than a day, you’ll also notice a thing which is known as rollover. This depends on the involved currencies with the trade direction, you would also pay little interest or also earn interest as well. For the part, if a country pays the ideal amount of interest, the world traders purchase currency against weak currencies while forming trends.
For me, Interest rate, Industrial production, GDP and current high important news are the most important information that I check before any new long term trade. For example, if I want to trade EURUSD I need to know these important facts about the European Union and US economy. Daily chart and Fundamental analysis need to show the exact same direction of the trade before any trade execution.
I like every Tuesday to check the COT report. How to use the COT report in forex trading? In the COT report is most important to figure out Reversals Type One or Reversal Type Two and using knowledge from that to assume the next long term movement in the forex market.
What we can see in COT report :
Try to see Reversals Type One – When the spread between commercial traders and large investors is big, then we should expect a market reversal.
Reversal Type Two – When large traders start to reverse their positions (i.e. the large investor’s line’s trend starts reversing), we can expect a market reversal most of the times.
Weekly charts and price levels
In step 2, traders need to see the big picture using the weekly chart, to get the idea for Long Term Forex Strategy. On the weekly chart, the trader needs to analyze important levels, last month and last year high and low, close prices, important Fib. levels. Important price levels are trader’s edge, an important trigger for any trade.
So, if you’re not grasping on the happening on currency pairs, it is better to view all weekly chart details with a step back. This would stop you from making uneducated guesswork.
Larger weekly based charts make move on your daily chart appear trivial while providing you with a better feeling about the data you’re analyzing. With a step back you can minimize second-guessing.
With such items, you also make strong decisions for trading for supporting positions that you hold. You must never make trades just for making these. Also, you must easily be able to explain all of these to third parties upon having. If you follow the rule, it would help in avoiding boring trade. With real trading, especially larger picture trading, it gets slow and boring. A lot of traders get brought in and trade in a quick and leveraged way, and due to this there are a lot of failing forex traders.
Forex Trading Technical analysis for long term strategy
The technical analysis takes a lot of forms while you’re putting this into practice. If you’re saying technical analysis for a single trader, they would also think about moving averages, while another market operator would think of MACD while mentioning technical trading.
Except for price levels, technical analysis can show divergence, supply and demand areas, Pivot point areas, oscillators levels such as RSI levels, Stochastic levels, MACd, etc.
There are no perfect rules for trading orders which can tell you when to buy or sell the asset with high probability. Trading is like signature unique, and traders need to develop an original methodology for trading and for market understanding.
While forex trading strategy with a bigger picture, you look out for different technical aspects for supporting trade. So, if you’re concerned about purchasing a currency pair, it shouldn’t be technically overbought.
Am I true or wrong?
And true and wrong. Momentum traders can buy overbought assets very easy but the mean reversion trader will sell. Both can be on the right side.
Some technical analyses must be involved in supporting the decision. This helps with timing while helping to avoid getting within a bad time. Overall you would also get the right idea, but with technical analysis, in the future, you’re also able to reduce associated risks.
Trading with long term forex trading strategy is all about taking all essentials into account while coming towards an informed decision. This is one of the best available methods of forex trading that has been utilized by experts.
What is my Best Long Term Forex Strategy? I like when fundamental news and technical chart show the same. For example, the strong engulfing pattern on the daily chart or weekly chart with strong industrial production for rising currency for me is the best trading opportunity.