Why Trade Forex long term



Why Trade Long Term?

One can't open a newspaper or trading magazine these days without being inundated by ads promising the road to riches through day trading and e-trading. "Hurry up...get on the gravy train to instant riches...don't dare be left behind", they all exhort. Indeed the number of day traders has increased exponentially over the most recent years as technology improvements have given quote access and raw computing power to the masses. Are all of these day traders really making tons of money? As we are led to believe by all the brokerage firms, seminar promoters, newsletter and e-mail advisory services, quote and software vendors, and e-trade gurus? Sadly, the answer is a resounding NO for the vast majority!

Even more sadly, most of them are losing their shirts even if they were previously successful traders on a longer-term time frame. In one recent study done by Professor Terrance Odean of the University of California at Davis, a sample of 60,000 traders was studied. He found the frequency of trading greatly increased when traders went from phone trading to e-trading and that the 20% of his sample who traded most actively underperformed the 20% trading least actively by 5-10% per year on average! In other words, going online increases trade frequency but decreases overall profits - and certainly requires orders of magnitude more of your valuable time.

It is clearly important for every trader to select the right time frame for them in which to trade. The right time frame for any trader is primarily a function of a trader's temperament. The successful long term trading mindset requires, above all, patience and perseverance. The successful short term trading mindset instead requires iron discipline, intense focus, and steely devotion. These are more difficult attributes to develop in the average trader. Too often the average short-term trader succumbs to the markets lure and develops a frantic, get-it-now mindset believing every price blip represents a trading opportunity. As this attitude is fanned by the media and brokerage industry, more and more long term traders have become aggressive swing traders and swing traders become rabid day traders - more often than not with disastrous consequences.

For traders with a calculating mind and patient temperament, however, mechanical trading on a longer-term basis using daily and weekly data offers undeniable monetary and personal benefits. There are good reasons for this.

Big Money Comes from Big Moves and These Take a Lot of Time to Develop

Historically, most of the really big money in forex has been made by carefully positioning oneself in a major move and patiently letting the move unfold and develop - generally over months but up to years in some cases.

Bag and DollarsLook at almost any long term weekly price chart and you will see many long, gradual trends that offer many low risk buying or selling opportunities. How much better off would your account have been had you been able to take home as little as 1/3 to 1/2 of any of these mega trends in profits. ..and done it in as little as one or 2 trades. For 95% of traders, the answer would be, "a whole lot better".

Forex-Signals-4U's unique long term trading methods allows a disciplined, unemotional, highly profitable approach to capturing large portions of major market moves with minimal risk and effort.

Long Term Trading Results in Less Trades with Fewer Mistakes and Lower Commission and Slippage Costs

The current trend towards trading in shorter time frames goes against a long accepted maxim in the trading world. This states that over trading is one of the biggest sources of losses facing both new and established traders. Why is this so? Obviously, more trades mean more commissions and more slippage. Few short-term traders realize, however, that their total commission and slippage costs in any year often exceed their total losses for the year. In other words, many losing short-term traders would have actually made money on an annual basis had they not incurred the exorbitant commission and slippage costs of trading throughout the year.

chart upAdditionally, fewer trades mean fewer mistakes. Larry Williams, an acknowledged master of day trading methods has stated that " one of the top three reasons people lose money in the markets is because of carelessness ". Obviously, anything a trader can do to reduce the frequency of trades will reduce trading costs and the likelihood of mistakes. Reduced trading is a cornerstone of Forex Signals visitor form Forex-Signals-4U trading philosophy.

We believe this approach invariably leads to greater overall trading profitability in the real world and it is far easier on the trader psychologically. Not wanting to dwell on the subject, suffice it to say that without a stable and positive psychological outlook on the markets it is almost impossible to succeed.

Long Term Trading Requires Dramatically Reduced Time for Analysis and Trading

If you are trading using weekly data, only one to two hours each weekend are required to implement a sophisticated long term trading system for 22 or more commodities. This includes the time to completely download your quotes and update your data files, verify which are the correct months to trade for each commodity, figure out if you have any positions to rollover, generate your trading signals, and write down orders to your broker. Contrast this with the life of a typical successful day trader who literally becomes a slave to their quote machines during market hours. Even if you trade part-time using only end of day data, how many times have you come home at the end of a long work day, tired and worn, and really didn't feel like sitting down with your computer to go through your trades? You probably felt that you just didn't have the steam for the required hour or two and, as a result, you rushed through it and made mistakes or critical errors in judgment. Don't just feel bad about it. Make a commitment to change!

FamilyWhether you like it or not, successful trading does take time to carefully assess your positions or potential trades and avoid careless mistakes. Your wife (or significant other) and/or kids probably end up resenting this time taken from them each evening. If you are like most traders, you often end up feeling trapped by the daily pressures to keep on top of your trading. These frustrations invariably lead to mistakes or bad judgments which unavoidably lead to mounting losses. Long term trading allows you to move back from the market and see the forest from the trees. Trading systems from Forex-Signals-4U can get you back on the road to making money, free yourself from your trading shackles, and get your life back!

Analysis of Long Term Data is Simplified by Reduced Noise

How many times have you looked at a short term price chart with daily or intra day price bars that looked like an unrecognizable seismograph readout without any clear clues to market direction. How many times have you then switched to weekly charts and easily recognized a number of very tradable smooth and stable long-term trends. This is not an anomaly. In fact, this disparity occurs almost all the time in the futures markets and these differences are easily exploited by appropriate technical analysis. Many trading systems that get whipsawed and eaten alive in a daily or intra day time frame (especially if you accurately include all the commissions and slippage costs) can be slightly reconfigured to perform exceptionally well using weekly data.

Forex-Signals-4U's trading systems allows a market-weary trader to draw on the inherent economical, technical, and psychological advantages of trading in a longer-term time frame by combining technically sound and rigorously back tested trading platforms that are totally non-optimized and completely mechanical.


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