Long-Term Macroeconomic Forex Trading

Long-term macroeconomic trading is the big leagues of forex trading. It involves holding positions for weeks, months and perhaps even years at a time. Therefore, it is traditionally used for hedge funds and other institutions.

There are a variety of strategies used for putting long-term trading principles into practice. In long-term trading, macroeconomic trends are key factors to watch and evaluate.

When analyzing currency price trends:

  • Currency Policies

 Look for currencies that are either overvalued or undervalued by the major global trading powers.

  • Interest Rate Cycles

Evaluate where the two currencies’ relative interest rates lie and where they might go in the future months.

  • Economic Growth Cycles

Judge the likely economic growth in a country over the next many months. If a country’s economy is productive and evolving, interest rates are likely to increase along with the currency’s value. However, if a country’s economy is sluggish, the interest rates will most likely lower and the currency will be hurt as a result.

  • Structural Deficits or Surpluses

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Search out major structural issues that might weaken or bolster the currency such as fiscal deficits or surpluses or trade deficits or surpluses.

Forex market traders tend to pick a trading style and stick with it. However, just because a trader prefers a long-term position doesn’t mean he can’t take advantage of medium-term price changes. Trading around a core position means taking profit on a portion of the overall position after favorable price changes. The traders will still hold a remainder of the core position during the trade and will reestablish a full position when it seems appropriate in the market.