Time to Become a Long Term Forex Trader
Many beginner traders prefer to play in short term and scalping, and do not understand how to trade real long term. Though “Short Term Mindset” can give big problem.
If you follow me in some time, you can know that I am a big supporter in trading forex in a long term . There are a number of reasons why I believe that long term trading can bring us more success than using small time frames in trading, and I will point out some of the reasons in this article.
The first thing I want to do is clarify that when I speak long term, I mean to look at the Daily Daily chart (D1) .
I heard a lot of people say “I started looking at long term trading because scalping did not work for me, I’m now using a long term strategy and trading with Hourly charts (H1)”. Look, I think the above statement goes a lot to traders so it’s no wonder why so many are hard to become profitable .
For some reason, most traders, especially beginners will play in short term and scalping . They do not even know how to trade real Long Term. So once again I need to emphasize that if we talk about long term trading, we are talking about using Weekly and Monthly Charts, and then using a smaller time frame for trading execution to make it more precise .
Before we get into the actual strategy, first I will share . That the right perspective is crucial when trading long-term strategies. I know that most of you only care about the actual strategy guidance, but I believe that the following information about perspective and the overall approach is actually more important than the strategy itself.
For example how “Short Term Mindset” can give big problem, let’s look at the following EUR / USD. In the 4HR EUR / USD chart below, people will look like this:
In the chart above, you see that there is a lot of bullish momentum moving towards a higher peak. From this perspective, it appears that all continuation bullish set-ups will be a great entry. However, in a long term view at exactly the same time, it gives a different story:
Long term traders with weekly charts, seeing that EUR / USD is still in a long term downtrend, and that bullish rally on 4HR chart is just a pullback. In fact it is a pullback towards an unexpected resistance (unexpected if you only see the short / mid term and do not realize what is going on in the long term).
If we move slightly towards the next time, you can see a bearish reflection from the resistance level. For traders looking at 4HR charts, this may seem like the right time to buy again in anticipation of the continuation of the Bullish trend.
What a short term trader may not realize is, that this is not a pull back from a 4HR uptrend, but a continuation of a long term downtrend. And the price keeps moving down to 2 weeks! After witnessing what happened, for 4HR traders, this looks like an unexpected big reversal in the market. As for the long term trader, it is a continuation of a clear (downtrend continuation) that has been expected according to the flow market, looks like this is on weekly view:
This is why it is very important to have a long term perspective from the market ESPECIALLY if you will call yourself a long term trader. Again, so many people see 4HR charts thinking they are long term traders, but they ignore the actual long term time frames that can get you into big trouble like in real life examples. The two bearish candlestick bars above will destroy traders trying to take long positions on short term views.
Now, I’m not saying that you can not be profitable trading on a 1HR or 4HR graph. What I’m saying is that it’s very difficult to trade consistently when you do not have a good perspective on long-term market movements, especially when trying to trade in a short / mid term . Thus, let’s talk about long term strategies for traders who want to be more profitable and consistent!
One important note about this strategy is that you must be disciplined if you want to succeed. Yes, you need discipline with all the strategies to expect success, but especially, if you want to trade long term strategies effectively, you have to control your emotions and desire to get into the market.
One of the biggest mistakes that unprofitable traders do is their over-trading and over-control trading. As humans, we always want to open positions or even always want to manipulate the trading OP, whereas such actions will only lead to reduced profitability.
If you want to succeed using a long term strategy, you should be able to accept that there will not be many entries (which is a good thing, in my opinion), and there is no chance of entering the market over and over again.
Here are 6 steps how to apply long term strategy:
1. Look at charts / charts monthly and weekly to observe price behavior in monthly and minnguan movements. Look for trends on the long term graph that has good direction and momentum. For example like this:
Identify the direction of the trend, bullish or bearish. Then it should be noted to just look for entry or Open Position (OP) according to the direction of the trend only. For example it is a bearish trend, then look for opportunities for OP Sell only, do not look for buy entry (remember we will play long term). And no need to take advantage of small ripple up and down the price movements as well as Short Term Trader.
2. Zoom into Daily / Daily chart and draw Fibonacci retracement Line from high to low current (or vice versa).
3. Look for pullbacks on the Time Frame Daily which is close to 38.2; 50.0; or 61.8 Fibbonacci Level. If the price gets closer to one of the 3 Fibbonacci Key Levels, be prepared for an entry / OP.
4. Look for Candlestick entry after Level fibbonacci test (untouched by Price).
As soon as the price touches the Weekly Fibbonacci Level, you are now in “awaiting signal” mode. In other words, the criteria has been posted for you to trade, now all you need is a signal to confirm.
For this strategy, the signal is Candle bar momentum daily according to the direction of our long term trend. An ideal daily Candle signal has a tail that has been tested (touches the fibbonacci level), and then turns back in the direction of the trend.
TEST LEVEL FIBBONACCI
5. Time for Entry / OP. Place stop and target.
Always Use TP: SL = 3: 1 ratio, at least 2: 1
On weekly chart, Draw the Horizontal line line line in the Support and resistance area where the previous period candlesticks bounce, Put SL above Line resistance 1. If the price is able to break Line Support 1, lock profit by moving SL over Line. If the price is able to penetrate Line Support 2, lock profit by moving SL above the Line Line etc.
6. Wait for Profit or Loss.
Some trades will profit and some can be loss. Do not try to manage the trading or work on it. Just trust the strategy and let the trading be a winner or loser.Trading is about calculating where a good strategy does have profit and loss. But by the end of the year, profit is far greater than loss. Everything will remain in strategy if you follow it with discipline!
One important note, you must be disciplined if you want to succeed. You have to control your emotions and desire to enter the market. One of the biggest mistakes that unprofitable traders do is their over-trading and over-control trading.
You have to be able to accept that there will not be a ton of entries (which is a good thing, in my opinion), there is no chance of entering the market over and over again and there is no need to “jump” into the OP and work on it.