Buy and hold: is it dangerous to Forex market?

Buy and hold are very popular strategies but when it comes to forex, it is somewhat considered as useless and oftentimes regarded as dangerous. There were debates and smart minds in forex world which argue that it is not applicable to currency trading. However there are certain sectors although agreeing that it has certain limitations when used in Forex trading still believes that it is a viable technique and has great appeal to many forex traders and investors.

Forex market

What are buy and hold and how it works?

Buy and hold is simply put as buying and holding currency.
There are two stages involved in buy and hold. The initial stage is buying one currency with another. The second stage is to hold the currency bought until the price goes up against the currency sold. In many instances the holding period last up to several years however it is not always the case. In forex market, the variation is through the short selling as Buy and Hold traders in forex market do not limit themselves to long side of the trading. A trader using buy and hold position should enter at minimal leverage if ever possible or with enough free margins in his forex account to avoid margin call or worst stop-out.

Timing is also not crucial in B&H although it can be an advantage as delaying can sometimes affects the overall trading however in some special cases, it can be considered positively. In many cases buy and hold position last for years when long period of waiting is employed. It can be closed at anytime when a large profit has been achieved or when it reached intolerable level of loss.

Opposition to buy and hold trading

What Forex partners and Forex brokers think about buy and hold is that this strategy cannot be used to forex market because currencies is unlike stocks commodities that can soar up their value as results of current events or fundamental events like new inventions, lack of competition, political swings.

The currencies however do not rally in the similar manner against another currencies unless those in times of turmoil or political unrest in third world currencies which easily influenced the currency’s value. Another opposition is from the forex brokers. Forex brokers make money out of spread and the frequency of trading, buy and hold strategy is too slow for them to earn significantly. This is also the reason why choosing a broker is as important as choosing the currencies.

Buy and hold in forex market

While the reason of opposition to buy and hold is valid, it does not eliminate the possibility that it can work well in buying and selling currencies. Whereas there is no rapid growth in the value, the high leverage on the other hand compensated its failure to sharp increased in value and overruled the currencies inability to depreciate in the same way to stock shares. In this manner, buy and hold makes long-term forex trading more controllable and flexible.

Buy and hold simply imply long-term holding period which is similar to carry trade which is another trading strategy. It derived its benefits from interest rate difference and follows no defined entry and exit rules. Buy and hold with protective stop-loss makes it as advantageous as it does not depend on the stability of the global economy. It has a long-term profit potential and a good way to start a set and forget trading style.

Buy and hold is a viable forex trading strategy and using it could give you substantial profits. However like in any other endeavors, as a trader you can use it at your own risk. It requires lots of patience and most especially your broker should be dependable and proven to lasts for years. They can easily agree or recommend the use of this strategy but always bear in mind; brokers are there to earn a living with your trading. The direction of your trade is not wholly dependent on your broker but most of all from your firm and solid decision. You should set your own trading plan and strategies not based on what others may think but on the direction you want your forex trading to tread which of course should be towards profits and gains.