Very long term trades

[bladerunner]

Hi everyone. This is my first post and I apologize if this has been discussed previously (please amalgamate it into an existing thread TFG if this has been discussed previously). I wanted to guage people's thoughts about very long term positions ie. 1 year or longer.

I am a relative newbie and have only been active in Forex for 6 months. Currently I am about 50% gain for the period on capital deployed. I recently reviewed my trading results for the 6 months for AU and find that I would have made more profit if I had just kept my initial short position from when I started shorting this pair (around 0.88) to now. Although I have picked up some of the swings, I have also missed out on some of the large moves down.

Currently I am thinking of just keeping the current short AUD.USD position I have from around 0.78 until 0.70 or 1 year, whichever occurs earlier. The other reason I am thinking about holding period of over 1 year is that there is a capital gains tax discount for investments held for over 1 year in the tax jurisdiction I am subject to.

I figure at 1:20 leverage and with a negative carry of 2% for the period, the position should show a positive 180% return if this reaches the target (0.70) within 1 year. There are a number of risks with this of course, mainly that the trend does not continue.

I think however, that if the trend continues, my return would not be greater from attempting to trade the ups and downs though. Also this strategy does seem to be more time efficient.

What would be the drawback of picking the highest conviction pair and trend you can identify for a period, entering at a point identified as being low probability of being stopped out and sticking with that for 1 year ? Is there something I am missing?

 

[tjenarvi]

My opinion, welcome to comments or disagree.

You admit as a relative newbie but your style of trading is not for newbie at all, I like your style. Even George Soros trading forex in very long term manner.

If you trade with Weekly chart, make sure you always stick with your strategy for the exit at your logical weekly sup/res and maybe also on key levels, because right now is a perfect downtrend, what if the market you trade is in a bound range too much, going up and down only taking out your break even point? You would have wasting your time of investment/trading.

Remember, trend does not change in 1-2 weeks in weekly chart, it takes time to develop counter trend movement, and it takes time too to retest highest/lowest point. If you want to take profit at the highest/lowest possible, you better be extra patience to wait price retest back to the highest/lowest point and see if it would break.

Example : in your chart, see on the left, it's uptrend, then high range bound, retest highest, false break, retest previous key swing, failed again then retest highest, failed then starting to develop downtrend but failed, range bound again, then produced small range bound, then starting to develop a text-book perfect downtrend structure, then retest previous broken support, then retest lowest, failbreak it, then retest the previous broken support again at the last swing, then failed, then retest lowest and break it and finally trend continued again, you know what I mean it takes time....., in this chart, it takes at least 2 years.

Remember also this is forex, high volatility and liquidity, not stocks, not commodity, even though the pair you are trading on is kind of "half commodity" kind of pair.


Best

 

[hafizhanif84]

U should care about swap rates also..if positive then it should be no problem if u wanna hold for longer time

 

[bladerunner]

Hi tjenarvi, thanks for your thoughts. I have been in the stockmarket since 1998, but Forex I've only looked at lately as stocks were getting too low risk:return in terms of being long but not high enough to go short in any scale.

>What if the market you trade is in a bound range too much, going up and down only taking out your break even point? You would have wasting your time of investment/trading.

That is very true. I guess I would get out of there if it was proving to be too rangebound. The reason I have been in Forex in the last 6 months is because it has been trending strongly. Basically USD strength. I think if that was not present I would be looking at a different market. There is probably something trending strongly somewhere.

The unique thing about Forex is the leverage. With that I have found it is incredibly hard to maintain long term positions. For instance it is about 3 days since I posted this and the firm conviction I would be holding out to 0.70 but when 0.762 presented itself, well the opportunity to take the profit was too much! So you take 200 pips but there is a potential 500 pips or more still on the table. The problem with 10x, 20x, 40x or 100x leverage is that your profit (and loss) is the same order of magnitude more. Your propensity to take a profit will also tend to be that degree of magnitude less.

The only way I can think around this is to leave a portion as a long term position. This will need to be so small as to not be worth worrying about. I am thinking of putting half my profit in a different account for long term trades and only using that for long term trades. The leverage on this account would be much lower, say 1:5 but the risk would be much lower too.

6 months ago I thought about putting an equal amount long USD on AU, UJ, EU. Looking back I think I left too much on the table there. But maybe the last 6 months is an anomaly in terms of trend strength generally.

 

[bladerunner]

Hi hafizhanif84, swap rate is relevant but looking back I don't think it would have made much difference to the main 3 trending pairs I have been active in (AU, UJ, EU). I mean it makes a difference in terms of holding cost only if there is no trend move. But the trend move in the last 6 months has been in orders of magnitude more than the swap rate. I think the main reason for blowing out of these pairs would have been poorly timed entry and stoploss point rather than swap rate, depending on the amount of leverage

 

[hafizhanif84]

i had a friend that hold long term trades..he managed to get only some profits because of negative swap..i think it is better to trade long term either long or short with positive swaps..that will be a great investments

 

[erebus]

I would look at EUR / JPY right now for long term, just enter small position on each signal, every few days or so, it could go for 1,000's of pips

 

[bladerunner]

Hi erebus, thnks for that tip. I have thought a few times, why didn't I keep UJ or EU for much longer but my trade size was always too big to do that. What I need to do for long term trades is to take small size and hold with no trailing S/L.

With EUR/JPY that has bounced a lot lately. With sell in May there could be a big opportunity to short EJ, euro has bounced and may go down with risk off and JPY might rally with risk off.

 

[TheForexGuy]

Especially if they pull that carpet out from their QE program, I can imagine the JPY being a hot currency.

 

[bladerunner]

Maybe too early for long term yen pair trades and too late for short. Something that has really interested me lately is the long term on AUD.NZD

If this is a bottom then this has a lot of runway. Anyway, I entered long today with a view to hold for 12 months. Negative carry of around 1.5% but RBNZ may reduce rates further before RBA so this may reduce. Multidecade (over 20 year) low recently around parity. This is my long term pick currently.

 

[Kenny Kristo]

I usually prefer long term trades too, but it is usually lasting for 15-20 days maximum and average one week, so never thought about taking it over 1 year. I usually target 100-150 pips and once that is achieved I prefer to close it out while it’s easier for me to work out things due to Nova FX broker with their daily market updates, it is a feature which helps me work easily due to the accuracy level of it and been completely free too.

 

[tjenarvi]

the swap rate for LONG AUDNZD is minus and twice bigger compare with EURUSD.
I feel mostly free too, and I really prefer long term trades, even hold for 1-3 years.

Look, an investment in forex if already:
1. beating the bank rates in my country 6-7% per year, capital gain
2. beating the inflation 5-10% per year, capital gain
3. beating mutual fund 10-20% per year sometimes 40-50% from the best investment mutual fund product, but sometimes result minus.
4. beating stock market? kind of hard to answer, stock and forex not very big different, becase remember stock has no swap rate, mostly 1:1, not like forex excessive 1:500 which actualy killing you softly, and furthermore we can earn devidend in stocks, which is interesting for me now.

I believe I can beat all of those 1-3 above first if we trade long term and take it slowly.
Because I have ever had profit 20% per month, does not mean, we need to trade a lot.
But trade as if you have only 1 bullet per month to hit.