Clearly, a stop loss designed to prevent significant losses will close out our trades more often than not. Indeed, short-term forex trading often demands that this is the case if your goal is to prevent losing a significant amount of money. For instance, let us assume that you have a risk-return ratio preference of Statistically, you will more often than not have losing trades. Of course, you can get lucky and have more winners than losers, but are you not effectively just rolling the dice at this point?
Which brings me to long-term forex trading. Remember that old saying that stock market professionals use - "It is about time in the market, rather than timing the market". The forex market works to quite a similar degree. It does, of course vary in the sense that you cannot simply expect to hold a currency until retirement expecting it to continuously appreciate in value!
However, when you start trading forex over the context of a week, a month - even several months - you are no longer trading on the basis of technicals. You are now trading on the basis of economic factors. In this regard, doing a reasonable amount of research and staying abreast of market developments means that long-term trading can prove a much more sustainable strategy. While there was a slight rebound throughout the latter half of March, the currency overall has depreciated against the USD.
Based on this simple thesis, we can reasonably expect that the GBP is more likely to depreciate as May 7 draws nearer. In this regard, following the long-term trend since March would have proven far more sustainable than simply attempting to jump in and out. Moreover, long-term trading gives us more pips to play with. This means that we can afford to invest less into a position or use less leverage because our goal is to make a profit over a longer time-span. Additionally, we can afford to set a stop loss at a wider range, e.
In this way, we are limiting the real dollar loss of our trade. Sure, it may not have the adrenaline associated with short-term trading, nor will you see profits yielded as quickly. However, if you are approaching this from a long-term standpoint, it is easy to see why this approach is more sustainable. To conclude, I vastly prefer long-term trading because it allows more of a chance to trade on the bigger picture, while concurrently allowing for a greater bandwidth to set a stop loss at a lower commitment of capital.
For these reasons, long-term trading remains my weapon of choice. Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it other than from Seeking Alpha.
The author has no business relationship with any company whose stock is mentioned in this article. Discount Fountain 4. In fact, retail trading a. This makes forex trading a strategy often best left to the professionals. The real-time activity in the spot market will impact the amount we pay for exports along with how much it costs to travel abroad.
If the value of the U. On the flip side, when the dollar weakens, it will be more expensive to travel abroad and import goods but companies that export goods abroad will benefit. Select Region. United States. United Kingdom. Anna-Louise Jackson. Fact Checked. Editorial Note: We earn a commission from partner links on Forbes Advisor.
Commissions do not affect our editors' opinions or evaluations. What Is Forex Trading? Featured Partner Offer. Limited Time Offer. Trade in a variety of assets including stocks, ETFs and cryptocurrencies. Learn More Via eToro's Website. Was this article helpful? Share your feedback. Send feedback to the editorial team. Rate this Article. Thank You for your feedback! Something went wrong. Please try again later. Best Ofs. Investing Reviews. More from. By Benjamin Curry Editor.
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