Well let's go ... I'll show you here graphic patterns for long term negotiations ... 5 to 7 months ...
Above you see an example of a position trade on the weekly USD/JPY chart. After the pair breaks a major bearish trend, a Double Bottom chart pattern is created and confirmed, creating a solid long opportunity on the chart. After the breakout, the USD/JPY traded in the bullish direction for the next five months, making gains of approximately of 20%.
Some traders may feel that a 20% move over a five-month period is not a substantial move or highly profitable. Well if you feel that way, you may not be considering that we are looking at a 20% move on an unleveraged position. If you were to capture even two-thirds of such a move, that would equate to about 70% on 5:1 leverage utilization, or 140% on 10:1 leverage utilization.
This is the Daily chart of the GBP/USD showing the Sterling price decline after the Brexit referendum. As a result of the Brexit vote out of the European Union, many investors initially lost faith in the Pound and began to look for other currencies and asset classes such as gold and commodities to invest their money.
The Pound eventually began a slow but steady rebound against the dollar to end strongly for 2017. It is important to realize that investor sentiment can change fairly quickly and it is the Position Trader’s job to gauge this and align themselves with the most probable scenario for the future.
Forex Position Trading Strategy
Now let’s take a look at an example of a long term position to demonstrate the power of this trading approach.
An example of a major recent political event was the Russian intervention in Ukraine. Ever since Russia invaded and added the Crimean Peninsula to its territory, it has been suffering the sanctions of the European Union providing an unpleasant economic situation in the country.
The European Union enforced economic sanctions on Russia in July 2014, and then it reinforced the sanctions in September 2014. This had a huge impact on the Russian Ruble.
Above you see the daily chart of the EUR/RUB Forex pair showing the EU sanctions impact on the Russian Ruble. The Ruble depreciated approximately 50% versus the Euro currency.
This situation provided a very attractive opportunity for the long term forex position trader. Let’s see how you could have taken advantage of the EU sanctions on Russia:
This is the zoomed in version of the previous chart. After the EU reinforces sanctions on Russia, the EUR/RUB Forex pair breaks the 51.00 resistance level that marks the last big top from the middle of March 2014 – when Russia took over the Crimea Peninsula. This happens right after the price action has already crossed above the 100, 200, and 500 Simple Moving Averages.
After the 51.00 resistance breakout, the EUR/RUB set a top in the 55.00 area (blue horizontal line).
The price then returned to the already broken 51.00 area for a support test. After a bounce, the blue horizontal line gets broken upward,creating a confirmation for the previous bullish breakout through the 51.00 resistance.
Before moving further, let’s understand what the thought process is. After a bearish fundamental event for the Ruble (the EU sanctions reinforcement), you are now getting a bullish technical signal for the EUR/RUB, which confirms the bullish long term position trade. Our negative fundamental outlook for the Ruble, was reinforced with a technically timed trading signal.