Why Trading Forex is So Difficult - Long Term vs. Short Term

There are tons of reasons but I'd like to talk about two that I think cover a lot of ground.

Most traders seem to be very short term "swing" or intra-day traders looking to pick up a few pips and move on. What makes this do difficult is that trying to accurately predict the little 20-30 pip blips and bleeps over and over again on a consistent basis with a long term profit is something I consider to be nearly impossible for the vast majority of traders to do. You'll have some winning and losing streaks but, overall, if you manage to even keep your head barely above water you're probably way ahead of the game.

Most of these very short term traders rely on the technical indicators to set up their trades. Many have "backtested" a system, but I think backtesting is a huge waste of time. To really test a system you need to back your charts up as far as they'll go then slowly move things forward, entering and exiting trades as you go. And if you really want to have a good test, start with $100 and burn it if you lose it. Now do some more testing the same way.

Most trading "systems' are variations of MA crossover systems. Trade "when the little hand is on the 2 and the big hand is on the...". Yes in a long term trend they look OK, but see the above then tell me if they really work. They can't tell you when profits are maxed and they can't keep you out of choppy markets, which is when you'll be giving back all the profits made when you were lucky enough to catch a trend.

Very few traders are long term and there are some very good reasons why. Longer term trading requires a very good knowledge of fundamentals and economics. It takes time to digest all this and most traders probably find it very boring and difficult to follow but, what really makes this type of trading so difficult is that in order to stay in these trades you'll need to be able to ride out the inevitable ups and downs that occur as a trend progresses. There's much less "action" here because longer term trends don't get set up every day (or even every week). These kinds of trades don't appeal to the gamblers.

All this being said, I really believe the long term trader has a much better chance of being profitable. I'll explain this by setting up a few bets on the NY Yankees.

Everyone knows the Yankees are a very good team. Does that mean they'll win the world series every year? No, but here's my long term bet:

I'm gonna bet that the Yankees are gonna win more games then they'll lose this year. That's it. I only have one bet the whole season. Boring, really. What's worse is that they've lost 7 out of their last 8 and they're below .500 for the year so far. I'm losing pips and I gotta stay in and ride it out. Not easy.

Here's the Yankee bet that's like trading those short term blips and bleeps:

I'm gonna bet the Yankees score in this inning. Hey, they scored in the 2 previous innings. Alex Rodriguez is coming up, the short term MA of runs scored by the Yankees has crossed over the long term MA of runs given up by the opposing pitcher...

There's a lot more fun in betting this way. You're gonna have 8-9 bets/day for 162 days. Plenty of action, as long as your money holds out.

I guess i'm a boring trader. Hope I didn't bore you too much.

If longer term trading interests you and you want some help with fundamental analysis, I have several other threads that will help. Just do a search.

just checked out threads started out by you newstrader, you seem to start a new one every other week or so. why not just create 1 thread so i can subscribe to it and read.

Not at all boring...

Trade Both Timeframes. It requires all that is being taught here @ FF {and probably then some}. ie MM, LotSize, Psych, PA, TA, FA....

Main Trade: MT = Long 10 multiples of EURUSD {Gonna Win more this season than Lose}
Scalp Trade: ST = Short 3 multiples of EURUSD {Gonna Lose This Game}
[Net Position = MT Long 7]
Game Over, they Lost, Long 3 Multiples ie cover 3 Shorts
[Net Position = MT Long 10]

great analogy man...although, it would have been better if you used the Mets instead LOL.

I have recently come to this conclusion as well.
Trying to guess the direction of the Eur/Usd every few days I have MISSED the longer term picture and MISSED out on PROFIT.

I think longer term trading could be very enjoyable, slowly increasing your position as it moves in your favour.

With all of the information the major banks, and trading floors have in their favour, I'm starting to see that the average joe scalper/swing trader sitting infront of their home computer is blind as a bat compared to the big boys.

So why do it? It's FUN! All of you reading these forums I'm sure have a gambling side. Perhaps this is a major weakness??

However I am completely clueless for long term entry and stop loss strategies. I would have a difficult time stomaching a 100+ pip loss.

Can anyone recommend good reading material for longer term fx trading??

Exactly what makes trading forex so hard!

Hey i've had some short $ positions for a while and I was looking for more after the GDP last Friday. After getting in, the $ started re-bounding and I was quickly down over 50 pips on my new positions.

Since I have a pretty strong belief that the $ will continue to weaken in the coming weeks, the drawdown was something I had to deal with; as it happened, the $ did start to fall again. Sure, I wish I could have shorted at a better price, but I still think the prices I got will look cheap as time goes on.

As far as being clueless for entries, use the resources available on FF. There's a calender that's painting an economic picture along with plenty of analysis. While specific trade calls are not being made, specific economic indications are being given and that's where your entries will be made from.

As far as an SL is concerend-you said you can't stomach a 100 pip loss. Fair enough, but how many lots are you trading and what size is your account? If u have 5000 in your account 1 or 2 minis is a safe level to trade long term. Where is it written that a $5000 account requires $20/pip positions?

On the other side of the coin, but no less poignant, "Picking Bottoms is tantamount to Catching Falling Daggers. If you are lucky, you are allowed to Miss One."

Ahh, I reminisce...
Dead Cat(s) Bounce...

why?

I belive most trader they just want to pocket the pip instand to holding the trade.

forex is a waiting game. or a picture game (understand indicators that you use)

for my system chech out link below
http://mtuppers.googlepages.com/test.html

The best material that I have read for long term trading isby far the Jacko house of pain thread. You should give at least the first 2 pages a read!

Usually, (but not always), a pair has a bullish week, or a bearish week, and I can see holding pairs for that long, or sometimes longer. However, there are ways to trade short-term and make money. It's your risk-reward ratio. I bet $100 the yankees will win, and if they lose you win $20. You can use support and resistance, and use a 20 pip s/l with a 80 pip tp, or whatever. Many people have 1:1 risk/reward, and I've been guilty of it myself, when really a 1:5 or higher could be better. The point is if you had a casino, and you were the house, you would make more money the more people placed bets, more than just having 2 or 3 wealthy losers. Depends on the amount of money you have also, with enough money, it would make sense only to trade long-term, but until people can get to that level, I would think that most people would prefer to mix it up.

Jacko calls himself a medium- to long-term trader, but I dont believe that with a 50/100 pips stop loss on the euro.

He is in a trade for days to a month and what I would call a long-term trader is months/years.

Still, excellent stuff in his thread.

there are always two sides to a book.

higher probabilities and good fundamentals does not equate success too. Fact is one needs to start looking past that wall and analyse things from all angles.

I'd like to bring us back to a famous quote written by john carter, "Views are like belly buttons, everyone has one."

Nice But 15m and 30m charts are less fit for such indicator systems and less comfortable because of news, try lowe timeframes and lower spread with targets of a few pips - and a broker that allows all that as Marketiva doesn't.
Give me a break... lol
Only if it's a bad short term trader or one that has a good system but doesn't follow it properly.

well I agree and I don't agree
the more experienced traders scalp the tick charts.. or without charts.. using the orders book.
every trader has to find the timeframe they fell confortable with.
I know there is a lot of noise in the intraday charts... but having a clear direction in mind of the daily and weekly charts... you can see positions building in the 1 minute charts... and you can take advantage of it to put trades in the best positions.
It is more risky.. more difficult... ? yes.. but... all the multibillionaire traders have always blown some accounts before do it. you cannot be rich without risk.

that is reason why most of time I will wait after news. if the news either very good or very bad should go more then 30 pip plus. so you can chase the trend and packet the money

most of time I only using marketiva chart. I using fxcm account to do big trades

In my opinion forex is only hard if you are trying to predict.

I trade both long and short and the only hard part for me when I started was trying to find a system that fits me.

Once I got that out of the way everything became very simple.

Trading Forex is only Difficult if you are not prepared.

Always remember Forex is dificult for who is starting , not for pros

SHORT! SHORT! SHORT!

If a person trades profitably short-term over a long while, isn't he a long-term success story then?

yea trading forex is like gambling for most people

those people who say they are winning now, see if they are still trading 2 years later