Applying the set-and-forget forex strategy

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Updated: 28 August 2020

It seems unlikely that there could be strategies that would allow traders to make a trade and leave it at that. Although this isn’t as easy as it sounds, it can be done with the right knowledge, understanding and skills. This type of method is geared toward trades with low leverage as it helps make an easier exit without large losses.

This method can be compared to how stock traders operate, buying a stock and continuing under the assumption the company will not disappear. They do not have to worry about margin calls and can hold onto shares for as long as they wish. When it comes to forex trading, this is not the case. Holding a position for a long time in forex is riskier because of factors like volatility and leverage.

Set-and-forget for investors

Most of these strategies are aimed at investors rather than speculators because of the recommended amount of capital needed. The idea behind investing is that the value of the asset will grow over a period of time. As a result, minor dips in value are not as influential because the value will grow in the long run. In addition, an investor does not have the risk of leverage should his or her investment fail, thereby reducing the overall risk.

Lowering your leverage

The use of leverage is not necessary for a long-term stock trader. In the same way, forex advice or that of any other market will suggest following suit. While leverage can produce high profits, it’s more likely that it will leave you with nothing after a margin call or pullback. It is therefore best for forex traders to work with the lowest leverage possible. A leverage of 1:5 might not grant extremely high profits, but it reduces the risk of debilitating losses when inevitable risks arise.

Moving average

One of the strategies you can use when pursuing a set-and-forget strategy is the moving average crossover system. A popular approach is to take a 50-day and 200-day exponential moving average. A signal to buy your chosen asset would be if the 50-day average crosses over the 200-day average, after which you will hold your asset. Alternatively, if the 50-day average crosses under the 200-day average, it is an indication to sell. In order to successfully trade this system, you will need to analyze and follow trends.

Fibonacci system

Another strategy is using a Fibonacci retracement system over a longer period of time. Traders looking to follow this method will buy after a 50% Fibonacci retracement after the trend swing, placing a stop loss at the following Fibonacci retracement level. This is a slower-paced method, but it allows for moderate growth over time. The aim is for the market to increase after a swing.

An alternative to leverage

Many traders need leverage in order to access capital big enough to trade with this method. Since leverage is not recommended for the set-and-forget strategy, there are alternatives that can provide a similar service. One alternative is to trade on the options market, selling puts against the SPY, for example. This is done with the idea that the market will grow and build a level of leverage as it increases. You could also buy calls or any other option through your broker.

For those trading spot forex, the best way to trade this strategy with low leverage is to set your trade specifications and leave the market to do the rest of the work. When doing this, it is vital to have stop-loss orders in place. This is, after all, the essence of set-and-forget.