Why Long-Term Trading Works
Due to the fact that the day-trading
narrative is so pervasive in the Forex market, when I say "Long-term"
many Forex traders think: "Oh, you mean looking at 1 hour
Occasionally you get someone who thinks
4 hour candles...
How about 1 day candles.
Many currency pairs have major trends
that last for months, which can only really be seen by looking at 1
day candles (at minimum). This is what long-term trading is all
about: trading the big trends for weeks or even months.
Before you dismiss this idea,
let me explain why it works and why it can provide you with a monthly
income more consistently than day-trading.
Let's look at a graph of the EUR/USD
The yellow line is a "speed line"
that shows how many pips-per-day, on average, a trader would have
made by going long on the EUR/USD at about 1.0729 back in April, and
holding until the beginning of August.
Why does this matter?
guaranteed average of 10 pips per
day by trading long-term. In contrast, nothing is guaranteed in
day-trading, except that you will lose most of your money.
If you traded only 60,000 units, which
is $6 per pip, that's a guaranteed average of $60 per day.
That's an average of $300 per week, or $600 bi-weekly.
How much is your current paycheck? How
does that compare?
If you get paid $8 per hour and work 40 hours per
week, that's only $320 per week (before taxes). Except the difference
is you made an average of $300 per week trading Forex and doing
absolutely no work at all.
Correction, I suppose you did do some
work pushing the "buy" button back in April.
Do you think Warren Buffett, billionaire investor, works for his money? His money truly works for him. He just lets his investments sit while they generate about $20 million per DAY. If you trade every day, you are not making your money work for you. Instead, you are still working for your money.
If you traded 100,000 units, or $10 per
pip, that's a guaranteed average of $100 per day. That's an
average of $500 per week, or $1,000 bi-weekly.
At minimum, you only need about $1,200 as
margin to trade 60,000 units (for 50 times leverage). Although, in order to stay in the trade
long-term without getting a margin call, it is best to have at least
$3,000 to $4,000 in your account and only trade with the $1,200.
Ideally, a trader should use less than
20% of their money for long-term trades (the screenshot above is only using about 5% due to my personal comfort level of only trading with 200,000 units).
If you do trade with 20%, the other 80% is not being
wasted by just sitting in your account. It is allowing you to survive
market swings while you make a guaranteed gain. You are already
trading with way more money than you have: 60,000 units on the
EUR/USD means you are trading $60,000 with only $1,200 as collateral. So let the other 80% of your margin sit tight while you make money.
Now, don't dismiss this information
just because you don't have $3,000 or because other trends would only
produce 8 pips per day, or something like that. That's not the point.
For one, some trends can produce 20-50 pips per day on average.
Here's the GBP/NZD with an average of 23 pips per day:
that's not the point either.
The point is guaranteed growth.
Long-term trading guarantees long-term growth. Even if you only trade
medium-term by trading for a few weeks at a time, you'll do a lot
better than day-traders (any growth at all would be better than blowing
up your account in 90 days). And even if you only have $200, that money can grow significantly over a year (more on that below).
Day-trading absolutely cannot provide guaranteed growth. It only provides guaranteed losses. Why? Because when you are
day-trading, you are completely unaware of the mega-trend happening,
lasting for months, and you often trade in the opposite direction of
There is a lot of "noise" in the forex market.
Even when you trade in the correct
direction, due to the short-sightedness of looking at 1 minute
candles, you may not realize that you could have made money if you
had just stayed in the trade longer than a few minutes.
Consider this: Why would anyone ever
trade in the opposite direction of the mega-trend? That's the very
definition of missing the forest for a tree. Making any trade against
the year-long mega-trend is like trying to climb a mountain during an
So then, how do you make a monthly income
from a long-term trade lasting for 2-6 months (or even 6+ months)?
Guaranteed Monthly Income from
There are a few options available to
long-term traders as the trade continues in their favor.
If they are holding a trade for several
months, then oftentimes their unrealized profit is considered a part
of their margin, so one option is to actually add to their trade by
using some of their unrealized profit as margin.
If trading 60,000 units can produce an average of
$300 per week, then after a month you may have about $1,200 in
If you use a small portion of that
unrealized profit to enter into an additional trade of only 10,000
units, then now each new pip is worth $7 ($6 + $1). Now you are earning an
average of $350 per week, or $1,400 per month.
If you only started with $3,000 then you are growing your account extremely fast: roughly a
40% gain per month. Stock market investors hope for only a 10% gain per
YEAR. At a rate of 40% per month, $3,000 becomes more than $150,000
in a year.
Yes, that's the power of compounding:
- $3,000 x 1.4 = $4,200 (+$1,200)
- $4,200 x 1.4 = $5,880 (+$1,680)
- $5,880 x 1.4 = $8,232 (+$2,352)
- $8,232 x 1.4 = $11,525 (+$3,293)
- $11,525 x 1.4 = $16,135 (+$4,610)
- $16,135 x 1.4 = $22,588 (+$6,453)
- $22,588 x 1.4 = $31,624 (+$9,036)
- $31,624 x 1.4 = $44,273 (+$12,649)
- $44,273 x 1.4 = $61,983 (+$17,710)
- $61,983 x 1.4 = $86,776 (+$24,793)
- $86,776 x 1.4 = $121,487 (+$34,711)
- $121,487 x 1.4 = $170,082 (+$48,595)
And a humble $200 can become about $11,340 in 12 months, placing you at month 4 in the above example, which means you can to turn $200 into over $150,000 in only about 20 months.
Now, these numbers obviously make a few
assumptions. First of all, it assumes you will be in a trade all year
long, which may not always be possible. Although that doesn't mean
you still can't trade. You just might have to enter the trade in the
opposite direction after a month of waiting to confirm a reversal of the big trend.
It also assumes that you are not going to withdrawal any
of your money for the first year.
But there is a benefit to this: Look
how large your account has grown after 1 year and LOOK at how much
money you made that last month. You made $48,600 in ONE month using
only 20% of your money with a safe long-term strategy of gaining an
average of ONLY 10 pips per day.
And what happens if you wait one more
$170,082 x 1.4 = $238,115 (+$68,033)
Can you survive on $68,033 per month?
But why don't I include "losses?"
Because if this is only one super-long trade, then technically there
are no losses. You might see your unrealized profit diminish a little
bit, only to go back up along with the trend, but you won't ever
actually realize a loss because you'll be 500+ pips in the green.
Alternatively, if you want a monthly
income now (and don't want to wait to grow your account so you are
making more than $50,000 per month), then the second option a
long-term trader can do is simply exit the trade at the end of the
month to realize their profit and immediately re-enter the trade.
The only main difference between
realized and unrealized profit is that unrealized profit cannot be
withdrawn from your account. Otherwise they are generally treated as
the same thing. So if you want to withdrawal some of your money, then
you can just realize the profit by exiting the trade only to
immediately re-enter a new trade.
Technically, you can think
of it as one trade because the only difference between the two
options is "realizing" profit for withdrawal. And the only cost
associated with "realizing profit," by closing the trade and
is paying another 2 pip spread, which is nothing compared to the 50+
pips per week you are gaining (on average).
If It's This Easy, Then Why...?
If it's this easy, then why don't more
people do it?
Because day-trading is the same as
gambling, and gambling is addicting. Ironically, it is more difficult
for people to hit the button one time (and let it sit), than it is for
them to spend hours trading every day.
There's a reason why retail traders are
called "dumb money."
The dumb money gambles, whereas
the smart money opens a casino. Or, at the very least, the smart money only plays a
game they can win.
I only bring this truth up now because all the "dumb money" stopped reading this article towards the top as soon as I mentioned long-term trading. It's not "fun" to trade long-term: keeping their finger off the trigger, while they let the money roll in, is boring.
No anxiety, no excitement, no fear of potentially losing big. It's boring making money confidently.
I bet Warren Buffett is really bored making over $20 million per DAY.
If trading long-term is boring to you, then find a hobby while you let the money roll in.
Lucky for you, my hobby is writing.
How I Win in Forex
If you read this article, then I have already told you for
FREE how to make money and win in forex.
However, I haven't shared everything I know. You can
certainly go and make money trading forex with this free information, but if
you want to know specifically how I guarantee that I win, then you can.