After the recent “margin scares” at Ox Securities, some of the investors stated they were going, “long only”. What is the benefit of doing this? Well, I am glad you asked.
A long-only (buying) strategy can be beneficial because, for certain currencies, the swap fees (or interest) are positive when you hold them overnight in a long position. This means that instead of paying to hold the currency, you actually earn interest. Specifically, new long-buying trades will have minimal or positive swap fees. For short-selling positions, swap fees are almost unavoidable. The swap fees can really add up.
The above graphic is not from a bot traded account. If it were, there would be a “T/P” number in each line. As each position is added, the “T/P” number is adjusted to reflect the change in the take profit based on the lot size and present price of the Forex pair. Unfortunately, algo trading bots don’t include swap fees when calculating these “T/P” prices. (I am not aware of any.) As trades or “deep trades” [multiple trades on the same pair accumulated by the bot to get positive on the trade] linger, the more difficult to close the trades in the positive.
What could happen if I go “long-only” on a Forex pair?
- Market Risk: If the market moves against your long position, you can incur losses.
- Limited Strategy: A long-only approach restricts you from taking advantage of potential gains in a declining market through short positions.
