Forex Trading Systems Blog

Many traders trade the markets several times a week, or even several times every day, but it’s important to note that long term forex trading can be just as profitable, if not more so. Just one long term position can potentially yield a lot more profit that hundreds of smaller positions.

If you’ve ever tried short term forex trading or scalping, you will know that it can be very stressful at the best of times. You have to think on your feet and react quickly to the movements of the market. You also have to contend with requotes and being monitored by your forex broker if you are doing a lot of very short term trading. There’s also the possibility of the platform going down temporarily which can destroy a short-term position, whereas for longer trades it’s not really an issue.

This is why it’s generally a good idea to trade 1 hour or 4 hour charts at the very least, because you have more time to analyse your entries and exits, and you can relax a lot more than if you were constantly entering and exiting positions all day long. If you really want to adopt a hands-off approach and leave your trading positions to unwind gradually you can adopt a really long term approach.

This involves trading daily, weekly or even monthly charts and is ideal for those people who maybe have a full-time job but still want to trade and make money from the forex markets. You simply wait for the right set-up and hold on to a position until it reaches it’s conclusion, depending on your own particular trading criteria.

For example, if you were interested in just trading the monthly charts you could decide to adopt an Exponential Moving Average crossover system to enter and exit your trades. So for instance you could wait until the EMA (5) crosses the EMA (20) or you could only enter a position when the EMA (5) and/or the EMA (20) crosses the EMA (50). If you make the right call, you can potentially yield thousands of points profit trading this way.

Take a look at the monthly charts of some of the major currency pairs for example. You will see after the EMA (5) crossed upwards through the EMA (20) on the GBP/USD pair in 2006, the price subsequently rose nearly 3000 points over the next 2 years, which is nearly $30,000 profit if you were trading 1 lot.

It’s a similar story on the USD/JPY currency pair. You will see by looking at the monthly chart that the EMA (5) crossed downwards through the EMA (20) last year and the price subsequently fell another 2000 points over the next 6 months.

So don’t think that you have to be constantly trading the markets all day long in order to make decent profits from forex trading because long term trading can be just as lucrative, and is certainly a lot less stressful.

By: James Woolley

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