How to Profit from Long-Term Currency Market Trends

Long term currency trends are where one can make good, hard profits if there is patience, strategic planning and the knowledge of how to read currency market dynamics. Many traders aim for quick profits and short term price movement, but as any successful long term trader will tell you, the more patient trader will win through time. Bigger trends can move for weeks, months, or even years and they capitalize on it.

One of the most important aspects of long term forex trading is being able to pick the direction the market’s head is currently in. Traders do this via technical and fundamental analysis combined. Technical analysis entails analyzing the price chart of financial things over the recent past with an eye to spot recurrent trends and patterns. Moving averages, trendlines and chart patterns are tools that show what trend the currency pair has (uptrend, downtrend or sideways). Long term traders like to stay away from the noise of short term fluctuations and they look for larger more established trends.

On the other hand, fundamental analysis requires comprehending the wider economy conditions in the money motion. Interest rates, inflation data and central bank policies as well as geopolitical events are all part of what drives the long term direction of currencies. For instance, if you expect the central bank of a country to start raising interest rates, the currency of that country may appreciate as investors look for a better yield. Traders that are willing to embrace long term concepts can use economic reports and news events to their advantage by staying educated on what is happening, and how it may shift market sentiment.

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Another important part of profitable long term Forex trading is risk management. For that reason, because trends can last for a long time, traders need to be ready for any market corrections or reversals. Stop loss orders ensure that your investments will not expose you to gross loss in the event of unexpected market shifts, if you are physically trading on your own, by limiting your position and setting (or using) stop loss orders; If you are using software, both JavaQuant and the Keltner Channel Trading System provide features to limit stop losses to 20% on a 24-hour interval. Remember that even the most reliable trends can pull back during the short term and a good risk management plan is essential.

This is a key advantage of trading the long term, as traders are removed from the stress of day to day market movements. This helps them focus on larger trends and lessen the effects of short term volatility and they don’t make impulsive moves. While this does provide a theoretical benefit, it also means that traders must be willing to hold their positions for longer, and be ok to ride out the ups and downs of the prices during this time. There is a time to be patient and stick to a carefully laid strategy for long term success.

If you are a long term trader, you also need to have discipline. Because the Forex market is inherently unpredictable, the propensity to make emotional decisions based out of fear or greed can throw a long term strategy out of whack. When you have a plan, and stick to it, and you’re willing to adapt your plan based on changing market conditions, you’re far ahead of the game. As the proverbs say ‘the punch is in repetition’ and by regularly reviewing your trading strategy and adjusting as necessary you are keeping in tune with the prevailing trends of your cash market.

If you can ultimately figure out how to profit from long term currency market trends, it won’t matter if you can predict the exact highs and lows of the market. Rather, it is about knowing the big picture and maintaining adherence to trends with robust underlying fundamentals. Forex trading long term is a rewarding and profitable endeavour under the right set of tools, knowledge and discipline.