There are a number of different forex trading strategies that you can use on the forex market. One of these forex trading strategies is the long-term buy and hold trade. It is important that you consider whether or not this type of trading is right for you. You should also consider how you are going to make a profit from this trading and the analysis that goes into it.
The Misconceptions of Buy and Hold Forex Trading Strategies
There are a number of misconceptions about buy and hold forex trading strategies. One of these misconceptions is that this kind of trading is dead. This comes from the popularity of the day trading strategy. Day trading is a short-term strategy where you do not hold onto a trade for very long. While this type of trading is very popular it does not mean that long-term trading is dead. There are a lot of people who look at long-term trading as the perfect strategy.
The second misconceptions that you need to know about relates to the analysis that is done for this trading. The misconception is that all long-term trading is completed on fundamental analysis. This causes traders who are not comfortable with fundamentals to shy away from long-term trading. The truth is that long-term trading can be done technically and fundamentally.
Long-Term Trading for New Traders
When new traders look at the market they are told to consider long-term trading. This is due to the lower amounts of stress that come with this trading. When you day trade you are working in a very fast-paced market. This can be too stressful for new traders and lead to major losses. It is important that you consider this when you first start trading.
Is Long-Term Trading for You?
Just as short-term trading is not right for every long-term trading can be wrong for some people. You have to consider your personality when you look at the suitability of this trading style. If you are uneasy with the idea of having a trade open overnight then you are not going to be comfortable with holding a trade open for days or weeks. This is the timeframe you are looking at with most long-term trading.
How Do You Profit?
Most long-term trading is done on the long-term trends that you find in the market. These long-term trends are the overall directional movement of the market. Most of these trends are formed by high impact forex news which is why many people assume that long-term trading is fundamental trading. To make a profit with this trading you will be trading on the trend.
You should try and get into the trend as soon as possible and ride it until it ends. Of course, this is often easier said than done, but this is the main concept of the trade. The long-term trend can last anywhere from a couple of days to a month. You need to be prepared to hold this trade open and to buffer the fluctuations that come with the long-term trend.