Forex Blog Articles

Long Term Forex Strategy – Complete Guide and Examples

April 2, 2020 | 11:24 am | Forex Blog Articles
April 2, 2020 | 11:24 am
Forex Blog Articles
Long Term Forex Strategy - Complete Guide and Examples

Using a Long Term Strategy can be Very Profitable in the Forex Market

One of the most profitable ways to succeed in Forex is using a long term strategy.

To understand what is a long-term strategy, what type of long term strategies there are, and how to prepare a trading plan for successful trades, we’ve prepared this complete guide for you.

 

What Exactly is a Long Term Forex Strategy?

Long term trading relies on fundamental and technical analysis using daily and weekly charts, it’s a trading style, in which you hold the position for a longer period of time.

While most forex traders come to the market with a short term trading mentality and plan, long term strategies are a great way for traders to have much larger profits, and lower their risk, with the right strategy. 

 

Advantages of trading forex long term

Here are some benefits of trading long term:

Cost effective. When you trade on larger time frames, you take less trades, so you don’t pay lots of commissions on trades. You don’t get affected by the spread since it becomes indifferent on larger pip targets.

Time effective. When you trade long term, you don’t need to be in front of the charts for long periods of time, only a few minutes every day and letting the market do its movements. Less work from you will bring better results.

Less stress. Keeping distance from the charts will save you from emotional rollercoasters. You will get better setups and signals instead of messy markets from the smaller time frames.

Quality signals. Key levels and chart patterns tend to be more reliable on larger time frames. You will get better entry and exit points so your performance will improve.

In this video, we explain some of the advantages of long term strategies

What Strategies in Forex are Good for the Long Term?

There are many strategies available to traders who choose to take a long term approach to their trading. Let’s take a close look at two of the best. 

Supply and Demand Strategy

If this method sounds pretty straightforward to you, that’s because it is. Named after and following one of the most basic economic principles, in the supply and demand method of trading, traders look for places where price has made a strong advance or decline. Once these points are found, the places are marked on a chart using rectangles.

The place where the price has made a strong advance is noted as a demand zone. The place where price has made a strong retreat is noted as a supply zone. 

The idea behind searching for these zones is that when the market makes a strong move up or down, that means that those points are places where traders think it’s a strong buy or sell. that’s why placing an order in those places is less risky, and you have a better chance to succeed with your trades.

We have a series of videos explaining in depth the supply & demand strategy, for Reading The Story Of The Market – Part 1 – Order Flow (2020), click here.

Set and Forget Strategy

Just like the supply and demand method, the set and forget method is exactly how it sounds. This is a long term strategy in which traders set everything up prior to trading and leave all of the actions automated according to predefined parameters. This framework includes setting entry, stop losses, and profit targets to effectively control your trades without having to do up to the minute work once started.

If you use fundamental analysis correctly, you can be quiet and indifferent to the movement of the price between your stop loss and take profit.

All you have to do is wait, hoping your trade will reach your take profit order as soon as possible.

 

Long term strategies checklist

If you want to trade supply and demand in the long term, make sure you follow the following steps.

  • Daily and weekly charts
  • Look for demand and supply zones and mark them in a rectangle
  • For supply signals, place a sell limit order at the bottom part of the zone for the first retracement of price to the zone.
  • Stop loss above the supply zone.
  • Target at the next available demand zone.
  • For demand signals, place a buy limit order at the top of the zone for the first retracement of price to the zone.
  • Stop Loss below the demand zone
  • Target at the next available supply zone

 

How to Plan an Effective Long Term Trading Strategy

While it’s necessary to have a strategy if you want to trade over a long term, not just any patchwork strategy will work. In this section, we’ll take a look at core elements which make up a good long term strategy. 

Trading Plan

A good trading plan is meant to act as a roadside barrier should you encounter situations in which you might lose your money. The trading plan is preparation, strategy, and technique all rolled up into one. Invest a lot of time in putting this together and you’ll be a more confident, well informed trader.

Fundamentals

You have to keep track of the basics. In this case, the fundamentals are things in the economy like interest rates, employment numbers, and even politics in certain situations. All of these elements have to be considered when you put together a long term trading plan. 

You need to know in depth the economic situation and economic policies of the countries whose currencies you follow

Trade the Trends

Piggybacking on the fundamentals, once you see the big picture and the way the market is moving or trending towards, you can keep it simple and trade the trends. 

Technical Analysis

The next phase in crafting a solid long term strategy is the technical analysis. While this phrase is big and has different meanings depending on the type of trader you are, in long term trading this means looking for technical things that will support your trades. 

Daily and Weekly Charts

When plotting a long term plan, use daily and weekly charts.

They will show you the big picture, you can use the technical indicators and understand how you want to manage your trade.

Place Your Stop Loss and Target and Take the Entry

Now that it’s all in place and your plan is tested and as sure as you can make it, it’s time to start trading. With all of the information you’ve put together, you should feel confident that you’re ready to place your stop loss and target and start executing trades.

An Example of a Successful Long Term Forex Trading Strategy

This is an example for a long term position on NZD/USD, we can see how the price creates a new demand on the weekly chart which also creates a Quasimodo pattern (We have a great video explaining the Quasimodo pattern), when the price touch this demand that’s the opportunity to open Buy position, the final target for this position is the supply above which is 1000 pips above, it took the price about 8 months to reach there.

Long Term Forex Strategy - Complete Guide and Examples

A – the price creates a new demand on the weekly chart

B – The price creates a new high which is higher than the last high (C on the picture) of the recent downtrend, which indicates the momentum switch from bearish to bullish and indicates the price tends to reach the supply above.

D – That’s the time that the price touch the demand first time after created, it is the right time to open a buy position.

E – That’s the next available supply which is the right level to close the buy position.

 

The Long Term Trading Forex Strategy Summed Up

As we mentioned earlier, while most forex traders trade on a short term daily basis, long term forex trading offers great earning potential. And while there is never a guarantee of success in trading, if you follow this guide and take your position seriously, you can enjoy a fruitful and long term ride in the forex market.

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