How to become a long-term trader? Read answer here

Traders of different types participate in the forex market. For a novice trader, it is important to find the trading style that best suits his or her personality and strategy. One has only so much energy, therefore, traders should focus on trading the products that they are best at and most interested in.

Many investors tend to choose day trading to avoid holding the positions overnight. If good at technical analysis, investors may give play to such comparative advantage when trading forex. Long-term forex trading, however, has higher demands on the investors in all aspects. Let's look at an example:

Tom is a forex trader, he mainly deals with the British Pound pairs.

One day a piece of bad news for the pound drove the volatility of the GBP pairs higher. Usually, this would bring losses to the traders. Tom was no exception. The pound fell, and its downtrend continued for some time since.

In such circumstances, most traders would be extremely frustrated. Yet Tom quickly calmed down,and persisted in recording such unusual market activities. He pondered over the lessons learned from the event for the next six months before he decided to sell his pound assets.

Judging from the above,Tom is a real long-term forex trader.

What is a long-term forex trader?

A long-term forex trader is an investor who buys a specific currency and then sell it after a period of time. Generally speaking, traders of this type buy a certain currency based on expectations and then sell it in response to market conditions. They expect the currency they bought to appreciate over time. During the holding period, they will watch market activities regularly, and then decide when to sell and exit according to the market conditions.

The key word for long-term trading is "investment". Long-term traders don’t aim for small profits. They strive to adopt effective strategies to gain higher returns out of their investment, not to be disturbed by the losses in the midway. Since the goal is to be profitable over time, all they need to do is to persist. For long-term traders, many resources and funds management skills are indispensable.

We say that a trader is a long-term forex trader, if he or she fits all the following descriptions:

§ He evaluates overall profitability rather than short-term returns;

§ He will hold a position for weeks, months or even more than a year;

§ He pays attention to spreads and interest rates;

§ He places much attention on market volatility, market liquidity and sudden price fluctuations.

Following the trend is one of the strategies preferred

Long-term traders tend to follow market trends. In fact, one of the characteristics of this type of trader is that they tend to identify a certain trend and then observe it for a period of time. One of the advantages of trend-following is that it allows traders to think about the pros and cons of a trend in a reasonable way.

Long-term traders are able to remain undisturbed by market turbulence, and avoid impulsive actions. Since these traders observe market trends for a period of time, their predictions about the market tend to be more accurate. They can differentiate deceptive trends from real profitable ones.

What does long term, medium term and short term mean for different trading strategies?

Long term, medium term, and short term are the usual holding time frames. But in the forex market there is no clear-cut definition for these time frames. For different trading strategies, phrases like long term, medium term and short term actually have different meanings. From the perspective of the length of the holding time, trading strategies are divided into day trading, swing trading, and trend trading.

For day traders who do not hold positions overnight and seek to close out trading positions the same day they were initiated, long term, medium term and short term can be described as follows:

§ The Long Term: lasting several hours to over ten hours, still hot holding positions overnight.

§ The Medium Term: lasting ten minutes to around an hour, still hot holding positions overnight.

§ The Short Term: lasting seconds to several minutes in duration.

For swing traders who look to take advantage of big fluctuations in the exchange rates, long term, medium term and short term can be described as follows:

§ The Long Term: lasting several months to a year or more;

§ The Medium Term: lasting several weeks to a month or so;

§ The Short Term: lasting a few days to a week or so.

For trend traders who aim at riding long term trends for great profits, long term, medium term and short term can be described as follows:

§ The Long Term: lasting a few months to more than a few years in duration.

§ The Medium Term: lasting from several weeks to as long as a few months.

§ The Short Term: lasting a few weeks.

How can a drop of water not dry up? "put it into the ocean."

#LongTermTrading#