Where long-term traders can have an advantage in FX - DailyFX Tips & Picks

THE FX market can be viewed in limitless ways and traded in unquantifiable combinations, but there will always be the long and short-term view. The short term is often more popular, because of the volatility, excitement and the potential for more trading opportunities. But in the background, there are still those who patiently analyse things with the bigger picture in mind.

These types of traders are known as surveyors of the FX markets, and use logic rather than sentiment when placing trades. Long-term trading focuses more on the fundamentals than technicals, which may naturally repel the many people who prefer short-term action.

A long-term trader is more concerned with the macroeconomic attributes that move a currency pair: anything from interest rates and monetary policy to geopolitical events.

These attributes provide information as to where the markets may trade after a certain period. In theory, trading long term is suitable for most people, as it focuses on logic, while also screening out short-term noise. But the long-term view does require a high level of perseverance and patience. Discipline is also essential, as there may be situations where a trade moves against the trader but where the trend should resume, as long as the fundamentals hold.

An example of when long-term traders would have triumphed was June 2014. This was when the ECB induced easing measures which weakened the euro. The effects lingered throughout the year, and we saw euro-dollar plummet 2,000 pips over a six month period.

For more information about long-term trading and fundamentals, please visit DailyFX – http://bit.ly/DFX-LT

Lukman Otunuga is a currency analyst at FXCM.