
The post Is There a Buy-and-Hold Strategy in Forex? by Jay and Julie Hawk appeared first on Benzinga. Visit Benzinga to get more great content like this.
Using a buy-and-hold strategy is certainly not the most commonly used way to trade forex since most forex traders focus on short-term strategies like scalping, day trading and swing trading. Long-term forex trading strategies do exist, however.
For example, forex trend traders, carry traders and international investors who do not hedge their currency exposure all establish long-term positions involving forex market risk. Even though the term is more commonly used among stock market investors, these forex strategies could be thought of as buy-and-hold strategies.
Note that these forex trading strategies might not be a good fit for the typical long-term investor because currency pairs can rise and fall over the long term. Still, they might suit a patient and savvy forex trader willing to establish and hold a position based on a longer-term market view established by careful market analysis. If you’re interested in learning more about forex buy-and-hold strategies, then read on.

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What is a Buy-and-Hold Strategy?
Among stock market investors, “buy and hold” typically refers to a long-term investment strategy where you purchase securities and keep them in your portfolio for an extended time frame. Because of the general propensity of stock markets to trend higher, many stock investors consider this a viable strategy.
If you’re a forex trader considering entering into a buy-and-hold position, you will generally want to take into account key economic factors for each currency in your chosen pair. For example, these factors might include central bank monetary policies, sentiment surveys and job market trends.
Keep in mind that you might have to wait for months or even years for your buy-and-hold forex trade to mature and become sufficiently profitable to meet the goals you set when establishing it.
Buy-and-Hold Strategy in Forex Trading
A forex trader may want to use a buy-and-hold strategy if they perceive a long-term trend in a currency pair is in the process of starting and should continue in the future based on the fundamental economic trends in one country versus another.
As part of their plan for establishing a buy-and-hold position in a currency pair, they may want to set clear goals for taking profits and cutting losses in case their view turns out to be wrong. Many long-term forex traders also use trailing stops to protect their profits and prevent a winning trade from turning into a losing one.
A trade based on a forex buy-and-hold strategy can offer substantial long-term profit potential if an extended favorable move occurs in the chosen currency pair. The trade might even offer additional profit if it involved positive carry.
That all might sound great, but keep in mind that currency buy-and-hold strategies generally require patience and deep-enough pockets to weather a significant adverse move. You will also need to trust your online forex broker for an extended period while the trade comes to fruition. Furthermore, some potential buy-and-hold trades may involve negative carry that can eat into any profits derived from a favorable move in the currency pair.
Example of Buy and Hold in the Forex Market
One example of a long-term trading strategy used by some forex traders is position or trend trading where a trader takes a position in a currency pair typically based on a favorable underlying trend and market view. Such a trader needs patience and deep pockets to withstand adverse market moves.
An example of a successful forex position trade in recent years could have involved buying U.S. dollars versus the Japanese yen in early 2022 when it was trading around 110. The position trader could then have sold the pair late in the summer of the same year at close to 145.
The trader would thus have locked in around 35 big figures of profit or around $24,000 on a $100,000 standard lot position size. The trader may also have enjoyed some extra gains from positive rollovers since they were long U.S. dollars, and U.S. Interbank deposit rates were generally higher than Japanese deposit rates during that time frame.
Another type of currency buy-and-hold strategy that might suit international investors is to purchase foreign assets, such as stocks, bonds or real estate. Note that this strategy involves taking forex market risk and can result in losses if the foreign currency corresponding to the purchased asset declines in value versus your domestic currency.
Carry Trade
Another type of buy-and-hold strategy used by some forex traders exploits the interest rate differential between two currencies. Commonly known as carry trading, this strategy typically involves buying the higher interest rate currency against the lower interest rate currency in a pair and then carrying that trade for an extended period of time.
The goal of carry trading is to capture the interest yield difference known as positive carry. Keep in mind that this strategy does involve taking forex market risk that can quickly wipe out any incremental carry gains.
A popular carry trade involves buying the Australian dollar and selling the Japanese yen when the AUD/JPY currency pair looks like it may be entering an extended upwards trend. Not only does this buy-and-hold trade have positive carry, but it can also show substantial returns from the bullish trend in the underlying currency pair.
Take the Next Step to Trade Forex with These Top Brokers
If you’re a retail trader looking to use a buy-and-hold forex strategy, then you will want to get all the necessary forex training you need and make sure you open a margin account with a reputable and well-regulated online forex broker. Benzinga has taken some of the guesswork out of this process by compiling the following comparison table of top forex brokers so you can get started quickly.
Frequently Asked Questions
Which strategy works best in forex?
The best strategy to use as a forex trader will largely depend on your personality and the amount of time you have to spend trading. Many traders have success using scalping, day trading, swing trading and trend trading strategies.
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How long should you hold trades in forex?
The length of time you hold a forex trade will depend on the strategy you use. Scalpers might only hold trades for a few minutes, while trend traders might hold a position for months.
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What is the easiest strategy in forex?
All self-directed forex trading strategies take time to develop and master, and the strategy you find easiest to use can depend on your personality. Most beginners find copy trading easiest to use since you just duplicate in your own account any trades made by the experienced forex trader you decide to follow.
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The post Is There a Buy-and-Hold Strategy in Forex? by Jay and Julie Hawk appeared first on Benzinga. Visit Benzinga to get more great content like this.