The lure of quick money brings many people to the online currency trading scene and most of the people get tied up, trying to make daily profits investing in short time frames, where prices are very volatile.
However, most of the top traders and the ones holding all the money only place between 1 and 5 orders per year, since they have found a way to make more significant profits on each of their trades. While this may not seem aggressive, these traders often risk as much as 50% of their accounts in order to secure profits in the hundreds of thousands and even millions of dollars. The real question to be answered is: how can you take advantage of this type of trade and make some real money?
Identifying the long-term trend is the first thing you must do, in order to place a trade of this magnitude. If you look at the EUR/USD during the middle of 2011, you will find that it moved in a channel that was approximately 500 pips wide for over 3 months. Once it broke out of this channel it continued to move down for 800 pips before correcting to the 76% Fibonacci level before turning down for an additional 1000 pips to this type of long-term trader.
Consider the effect of having a $5000 dollar account and what a 1000 pip successful trade would mean to you. If trading mini-lots you would have a gain of 20% for the year on a single trade. In this economic time when banks are offering 2% interest or less, a return of 20% is fantastic. This trade taken at the right time could have provided nearly 1800 pips.
The Forex market is volatile and you must be prepared for this volatility when attempting this type of trade. Based on a chart describing the above trade the proper point to sell would have been between $1.4000 and $1.3900. Had you taken this trade, you would have had to agonize through nearly two weeks with a 100 pip or greater loss in your account before the market continued in the down trend. However, once through that point the money was there for the taking. Big trades require the guts to have staying power.
Another key to this type trade is to not try and predict the trend, let it develop and then ride the wave. Wait for the breakout, execute your trade and trust in the trend. Remember you are trading for the long-term and that could mean a few months not days. You are searching for big profits. The market is going to correct itself as the trend continues and you must weather these pullbacks with calm. Be careful of trailing stops to close as you will be stopped out on a correction and may have to wait for months in order to find another trade.
In conclusion, you will find that trading these long-term trends will find big profits but the rules of money management go out the window when you have a small account. You may find yourself with more than 30% of your account on the line but you should find that the profits on these trades more than make up for it.