While trading in foreign exchange market, one looks forward to income gains in the form of interests and dividends, in addition to capital growth. The hardest aspect of trading is to find a good trade. That is because it is difficult to forecast the development of prices in the future. Long term trading provides time and strategy to master it.
The logical approach to trading is quite similar to completing a jigsaw puzzle.
· Identifying major areas of support/resistance.
· Comparing charts to indicate trend continuation.
· Looking for high probability (or logical) point of entry and manage the trade.
Thus long term trading effectively provides more opportunity to play with pips, making it much less fatal than short term trading.
We can compare this with an example. A long term trade provides more than 100-200 pips for every position, while the number goes rarely beyond 20 in short term trading. Let us assume that there have been 10 profitable pips, and that from each profitable trade, 2 pips are dedicated for the broker.
In case of long term trade yielding 200 pips, a profit of 2000 pips is earned, while it takes about a 100 trades of short term trading to reach up to 200 pips of profit.
In each case, the total number of pips awarded to the broker adds up to 20 and 200 respectively. This means a broker has about 1% share in case of long term trading, while the same broker earns 10% benefit.
This clearly shows that it is a more sustainable strategy and one can absorb many small losses (even if there are rather lot of them) by hanging on and adding to the trade. In other words, a single long term position can potentially yield a lot more profit than hundreds of smaller positions, and rather lower commitment of capital.
Long term trading provides more time to analyse the entries and exits and avoids unnecessary stress pertaining to constant entry and exit of positions all day long. Further, the analysis requires no complex indicators and has high resistance to market volatility. It reduces the impacts of any kind of fluctuations in currency value. Whenever something important happens, simply changing position’s parameters solves the problems.
Conclusively, long term trading reduces the effort and stress of an trader, and above all, is economical.
The logical approach to trading is quite similar to completing a jigsaw puzzle.
· Identifying major areas of support/resistance.
· Comparing charts to indicate trend continuation.
· Looking for high probability (or logical) point of entry and manage the trade.
Thus long term trading effectively provides more opportunity to play with pips, making it much less fatal than short term trading.
We can compare this with an example. A long term trade provides more than 100-200 pips for every position, while the number goes rarely beyond 20 in short term trading. Let us assume that there have been 10 profitable pips, and that from each profitable trade, 2 pips are dedicated for the broker.
In case of long term trade yielding 200 pips, a profit of 2000 pips is earned, while it takes about a 100 trades of short term trading to reach up to 200 pips of profit.
In each case, the total number of pips awarded to the broker adds up to 20 and 200 respectively. This means a broker has about 1% share in case of long term trading, while the same broker earns 10% benefit.
This clearly shows that it is a more sustainable strategy and one can absorb many small losses (even if there are rather lot of them) by hanging on and adding to the trade. In other words, a single long term position can potentially yield a lot more profit than hundreds of smaller positions, and rather lower commitment of capital.
Long term trading provides more time to analyse the entries and exits and avoids unnecessary stress pertaining to constant entry and exit of positions all day long. Further, the analysis requires no complex indicators and has high resistance to market volatility. It reduces the impacts of any kind of fluctuations in currency value. Whenever something important happens, simply changing position’s parameters solves the problems.
Conclusively, long term trading reduces the effort and stress of an trader, and above all, is economical.
