WHAT IS LONG TERM TRADING AND HOW CAN I GET STARTED IN IT

Long term trading is the trading of a commodity, stocks and or currencies on a trading platform, over a long period of time, by a professional trader in order to maximise profit. That would be my friends, a simple definition of what long term trading is. As long as we have an understanding of the art of the trading, be it the forex market or any other market for that matter, then it would be easy to understand what it means to place an open position over a long period of time.

To trade long term, you would have of course had the knowledge, of trading the forex market first, before even thinking of risking real money to trading on a long term bases. This method of trading is very unpopular amongst many retail forex traders but tends to reward very handsomely when one is on the right track. This is because it demands from traders a lot of patience and endurance for results to play out.

In my books, if you must get started as a long term trader, you would need extra capital than the usual hundred or two hundred dollars ($100/$200). The reason for this is if the market were to make big moves, the money you have in your portfolio should be able to cushion your fall in case it goes against you for some time. Such a trader would need to possess a good level of patience to wait on the analysis they have done on their charts to come to fruition. You would have to made up your mind as to how long you are willing to keep the trade in the event you are in are truly riding along with the trend and what you would do if the trend were to go against your position.

Normally, most long term traders base their analysis more often on news events, -fundamentals- than on the technical aspect or outlook of the currency pair in question. There is a term called “Carry Trade”, in the forex market. Understanding what carry trade is all about can help long term traders base their decisions on interest rate change over a longer term and make good yield. Be advised that if you do not fully know how to implement this carry trade, then it would be hard to make money as you would be risking a lot over something you have not fully grasped. Simply put, carry trade involves buying a currency that pays a high interest rate while selling a currency that pays a low interest rate.

Other issues to consider as a long term trader would be your “risk aversion”. In financial jargon, if you are willing to risk a lot to enter a trade then you could be said to have a “low risk aversion”, but on the other hand if you are not willing to risk much then you could be said to have a “high risk aversion”. When every trader like you has a low risk aversion then such carry trade entry would eventually be very profitable. Do your homework to understand these terms and how to make effective use of them. The advantages of trading long term far exceed short term. If you are not prone to sticking your head into the screen of your computer system for hours, then trading long term may just be for you. If you have good capital and would be prefer to focus on other aspects of your life, then it may be for you. You simply would like to study your chart, assess you risk involvement and consequently take or enter a trade.

In a nut shell all you need to be a long term trader, does not end here, but we strongly recommend that you keep the above mentioned in mind to further strengthen your resolve to trade long term.

Visit: www.fxtrendman.blogspot.com  for more incisive experience with what you need to know.

Ephraim Archibong is a trader of over four years and counting. He is willing to share his knowledge and experience with anyone who is willing to learn.