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All the problems in forex short-term trading,
Have answers here!
All the troubles in forex long-term investment,
Have echoes here!
All the psychological doubts in forex investment,
Have empathy here!

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In two-way foreign exchange trading, in-depth analysis from the core perspectives of international financial theory and monetary economics reveals that the price movements of foreign exchange currency pairs almost always exhibit a narrow range of fluctuation. This trend is not accidental, but rather the result of the combined effects of multiple macroeconomic factors and policy adjustments.

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This is primarily because major governments and their central banks worldwide consistently prioritize maintaining the stability of their national currency exchange rates, facilitating smooth international trade, and achieving stable macroeconomic growth as core policy objectives. To achieve these goals, they flexibly utilize various monetary policy tools, combined with direct intervention in the foreign exchange market, to rationally regulate the price of their currencies, stabilizing them within a relatively reasonable and controllable range. This avoids significant currency price fluctuations that could impact their economies, which is precisely the key reason why foreign exchange currency pairs rarely exhibit sustained unilateral trends and instead tend to fluctuate within a narrow range.
In high-frequency forex trading, an investor's trading strategy directly impacts the level of risk. This is especially true when investors close positions promptly after making substantial profits in short-term trading, or when they persist in holding positions despite no profit or even floating losses. In these cases, the overnight interest rate differential, unique to forex trading, becomes significant and can even directly affect investment returns. The overnight interest rate differential refers to the interest rate difference between different currencies. When an investor holds a position overnight, this differential translates into actual interest income or expenses, directly impacting the investor's trading costs or profits. Its level and whether it's positive or negative directly affect the investor's holding costs.
If an investor plans to establish a long-term position, based on the core logic of interest rate parity theory and the practical needs of forex risk management, the established position must ensure a positive overnight interest rate differential. Only in this way can the holding cost be guaranteed to be negative, or at least kept within a reasonable and acceptable range, thus preventing the cost pressure of long-term holding from eroding investment profits. However, in reality, the interest rates of major currency pairs are usually extremely similar. This phenomenon is the result of multiple factors, including the coordination of monetary policies among major global economies, synchronized fluctuations in economic cycles, and the accelerated integration of global financial markets. These factors have led to a gradual convergence in interest rates among major economies, with interest rate differences narrowing.
In this context of interest rate convergence, investors, whether holding long or short positions, may face a significant accumulation of negative interest. This negative interest does not disappear with short-term market fluctuations but accumulates over time. In the long run, this continuous accumulation of negative interest not only gradually erodes the investment profits already gained but, in severe cases, may even prevent the final investment return from covering the various costs incurred by long-term holding. From the perspective of core evaluation indicators of return on investment and professional calculations of net present value, this long-term holding strategy will ultimately be counterproductive and fail to achieve the investor's expected investment goals.

In forex trading, there is a long-standing but often underestimated reality: the global mainstream currency system, under the current international financial landscape, is no longer suitable for ordinary forex traders to engage in long-term positioning and deep investment.

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This structural contradiction not only affects the profit potential of individual investors but has also gradually evolved into one of the core dilemmas that the forex market has struggled to overcome for nearly two decades. Mainstream currencies, once considered stable asset allocation tools, have gradually lost their independent momentum in the complex global interconnectedness of the market, posing unprecedented challenges to long-term investment strategies.
If we delve into the fundamental logic of forex investment, especially starting with the classic theory that "interest rate differentials determine the long-term value of a currency," we will find that in the real market, the investment opportunities offered by mainstream currencies are extremely limited, even nearly exhausted. Theoretically, investors can obtain interest rate differentials by holding high-interest-rate currencies while simultaneously expecting appreciation for double returns. However, reality is far more complex than theory. When the monetary policies of all major economies are constrained by the dollar-dominated global capital flows, the space for interest rate arbitrage is greatly compressed, and the proper value reassessment process is distorted.
Major currencies widely traded and held in reserves, such as the dollar, euro, yen, and pound sterling, have long held a central position in the foreign exchange market and become the preferred targets for various investors due to their high liquidity and global convertibility. However, this very position has also trapped them in a policy dependency that is difficult to escape. As the world's primary reserve and settlement currency, the dollar's interest rate changes directly affect international capital flows. Other major economies, in order to maintain financial stability, have to respond with policy changes, forming a de facto "follow-the-leader mechanism."
To maintain the stability of their currencies in global capital flows and avoid capital outflows and currency devaluation triggered by the dollar's strong interest rate policy, these countries' central banks often have to passively follow the Federal Reserve's monetary policy pace and adjust their own interest rate levels. When the US begins an interest rate hike cycle, even if their domestic economies are not overheated, economies such as the Eurozone, Japan, or the UK may be forced to raise interest rates to prevent their currencies from being "siphoned off" by the dollar's high yields. Conversely, when the Federal Reserve cuts interest rates, these currencies face a dilemma: whether to synchronize with the easing measures—easing could exacerbate inflation, while not easing could lead to excessive appreciation of their currencies or capital outflows.
This long-term linkage between interest rates and policy has kept the interest rate differentials between major currencies within an extremely narrow range, making it difficult to create significant arbitrage opportunities. More importantly, exchange rate movements have lost their independence, lacking trend-based fluctuations and remaining in a state of prolonged consolidation. Even short-term fluctuations are mostly driven by market sentiment or unexpected events, making it difficult to support a sound long-term investment logic. As a result, despite the large trading volume and active market, truly sustainable and predictable opportunities suitable for long-term investors are few and far between.
The potential of the foreign exchange market is largely suppressed by this systemic convergence. Investors, in what appears to be an open market, are actually facing a highly homogenized trading environment. For long-term traders who rely on trend, swing, or value judgments, a market lacking clear direction and sufficient price spreads is tantamount to an "investment desert." This not only weakens the resource allocation function of the foreign exchange market but also prompts more and more investors to turn their attention to non-mainstream currencies, emerging market assets, or cross-market hedging strategies in search of genuine differentiated opportunities.
This reality reminds us that in a globalized financial system, apparent liquidity does not equate to true investment freedom. Behind the "safety" of mainstream currencies may lie the risk of stagnant returns. Future forex investment may no longer rely solely on judgments about single currencies but will require understanding the interconnected logic of global monetary policies and the ability to find asymmetric opportunities within systemic constraints.

In the field of two-way forex trading, a fact that all investors need to be clearly aware of is that there are no absolutely immutable operating rules in forex trading, and it is difficult for forex traders to achieve so-called stable profits. Any claim of mastering absolute rules and achieving continuous profits is essentially inconsistent with market reality.

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If we carefully examine the current forex market from the perspective of interest rate theory, we will find that its practical feasibility is actually very limited. The US dollar, euro, Japanese yen, and British pound, among other major global currencies, have long held a central position in the foreign exchange market due to their core characteristic of free convertibility worldwide, becoming the primary trading instruments for the vast majority of investors.
However, the issuing countries of these major currencies also face a common market challenge—to effectively resist the siphoning effect of the US dollar and prevent their domestic funds from being significantly drained by the dollar's high interest rate advantage, these countries' interest rate policies are often forced to be highly pegged to the US dollar. In other words, their domestic currency interest rates must remain closely aligned with US dollar interest rates. Both the direction and magnitude of interest rate adjustments need to fully consider changes in US dollar interest rates. Only in this way can they maintain the stability of their domestic funds and prevent large-scale capital outflows.
This high degree of convergence in interest rates directly results in a significant compression of the interest rate differential between major currencies, even shrinking it to a negligible level. Consequently, the price movements of these major currency pairs tend to enter a prolonged period of consolidation, making it difficult to form a clear and sustainable upward or downward trend.
In this market context, if forex investors continue to formulate investment strategies and conduct investment operations solely based on the fundamental theory that "interest rates determine currency value," they will find it difficult to find suitable trading opportunities in the market and may even face the risk of losses due to misjudging market trends.
We know that in addition to the US dollar, euro, Japanese yen, and British pound mentioned above, major global currencies also include the Canadian dollar, Australian dollar, Swiss franc, and New Zealand dollar. The core reason these currencies are considered major currencies is their advantage of free global convertibility, resulting in high activity and acceptance in international settlements, foreign exchange reserves, and investment transactions.
However, even so, the issuing countries of these major currencies cannot escape the influence of the US dollar's "siphoning effect" when setting interest rate policies. To cope with the potential capital outflow pressure from high US dollar interest rates, major global currencies typically choose to follow the pace of the US dollar's interest rate policy, keeping their own currency's interest rate closely aligned with the US dollar's interest rate. This approach maintains interest rate balance between their currency and the US dollar, reducing the possibility of capital outflow.
This widespread interest rate following behavior ultimately leads to minimal interest rate differences between major currencies, with almost no usable interest rate spreads. Consequently, the market trends of these major currency pairs are mostly highly consolidating, lacking clear trends. This further confirms the conclusion that current foreign exchange market operations are not feasible from the perspective of interest rate theory. It also illustrates once again that there are no absolute rules in foreign exchange investment and trading, and stable profits are even more difficult to achieve.

In two-way foreign exchange trading, regulatory agencies in various countries, out of prudence regarding financial risks, have successively lowered the leverage ratio.

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Leverage ratios of hundreds of times, which were common in the past, are now strictly limited. Many countries have even capped the leverage for retail investors at 30 times. While this change helps reduce systemic risk, it also directly weakens the capital management capabilities of retail investors, making it difficult for them to participate in the market with small amounts of capital and obtain substantial returns. Without the support of high leverage, the willingness of ordinary investors to take risks has significantly decreased, and the entry threshold for the foreign exchange market has been raised.
In recent decades, major countries around the world have generally adopted managed floating exchange rate systems to maintain a competitive advantage in trade exports, ensure the independence of monetary policy, and achieve relative exchange rate stability. In this context, currency exchange rates are often controlled within a narrow range to avoid large fluctuations. While this stability is beneficial to international trade and macroeconomic regulation, it sacrifices the price elasticity of the foreign exchange market, leading to fewer trending market movements and a gradual shift towards a state of "low volatility and low opportunity." As leverage decreases and volatility diminishes, the vast majority of retail investors who previously provided liquidity to the market have withdrawn or reduced their trading frequency. The activity of the foreign exchange market relies on frequent trading by a large number of participants; as the retail investor base shrinks, market depth declines, and trading volume drops significantly. This deteriorates the overall investment environment of the global foreign exchange market, exacerbating the liquidity shortage and further inhibiting the inflow of new funds, creating a vicious cycle.
Besides changes in market mechanisms, policy measures have also limited the development of foreign exchange investment to some extent. Some major countries, for reasons of maintaining the stability of their domestic financial markets, protecting the financing function of their stock markets, or preventing capital outflows, have implemented stricter controls on foreign exchange trading. While these measures contribute to macroeconomic control, they have also objectively weakened the attractiveness of the foreign exchange market, gradually marginalizing it in various financial asset allocations and making it difficult for it to compete with mainstream markets such as the stock and bond markets.
In this environment, foreign exchange investment management tools originally designed for institutional and professional investors, such as MAM (Multi-Account Management) and PAMM (Percentage Allocation Management Account), have also struggled to gain widespread adoption due to a lack of sufficient user base and market vitality. These tools rely on an active trading environment and stable capital inflows, but in the current context of insufficient liquidity and low investor confidence, their advantages are difficult to realize, naturally hindering their widespread application and influence.
A deeper reason lies in the frequent intervention of central banks in the foreign exchange market by major currency-issuing countries. Through buying and selling their own currencies, adjusting interest rates, or issuing policy guidance, they actively control exchange rate trends. Their aim is often to maintain export competitiveness or stabilize inflation expectations, but the result is the artificial suppression of natural market fluctuations. In the long run, this intervention causes exchange rates to deviate from true supply and demand, leading to distorted price signals, a warped market mechanism, and a gradual loss of the investment value and discovery function of foreign exchange trading.
Given the lack of long-term opportunities in the market, many trading platforms and marketing institutions have turned to promoting short-term trading, even advocating the concept of "getting rich through intraday trading," attracting newcomers with overwhelming advertising. However, a thought-provoking phenomenon is that the world's top ten investment banks, possessing the strongest financial resources, algorithmic systems, and informational advantages, rarely use short-term trading as their core profit model. This illustrates that short-term trading is not a stable and sustainable profit path, but rather a business strategy used to generate trading frequency and earn commissions. Inducing retail investors to trade frequently is essentially misleading and seriously deviates from the original intention of rational investment.
In summary, forex two-way investment is facing unprecedented systemic challenges: tightening regulations, decreased volatility, liquidity shortages, policy suppression, limited tools, and distorted market mechanisms. These multiple factors are intertwined, gradually diminishing its former appeal. Investors should maintain a clear understanding when participating, avoid being misled by short-term hype, rationally assess risks and opportunities, and approach forex investment—a once-glorious field that is now in a period of transformation—with caution in today's profoundly changing global financial landscape.

In the field of forex two-way investment, low interest rate spreads are undoubtedly a significant advantage, reducing transaction costs and unnecessary capital losses to some extent. However, the accompanying narrow volatility range is a significant disadvantage. This coexistence of advantages and disadvantages is the core reason why most short-term forex traders struggle to achieve profitability.

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Because the forex market fluctuates within a narrow range, traders find it difficult to create sufficient profit margins to achieve substantial gains. Instead, they are often stopped out by minor fluctuations, repeatedly missing profit opportunities and constantly bearing the pressure of capital losses. This puts many short-term traders in a dilemma.
In reality, currency pairs with low interest rate spreads are not suitable for short-term trading seeking quick profits. They are better suited for swing trading or medium-term investing, as these focus on grasping long-term trends and can, to some extent, mitigate the limitations of narrow-range fluctuations, fully leveraging the cost advantage of low interest rate spreads.
However, even so, most forex traders still find it difficult to switch to swing trading or medium-term investing. One major reason is their inability to bear the inconvenience of negative overnight interest rate spreads. This inconvenience is most directly reflected in the daily overnight holding fees incurred by swing or medium-term traders.
This ongoing expense erodes potential profits, becoming a significant burden for retail investors with limited capital seeking stable returns, forcing them to abandon this trading method better suited to low-interest-rate currency pairs.
In recent decades, to maintain economic stability, countries have actively taken measures to stabilize their currencies within a relatively narrow range. While this stability benefits the smooth operation of the national economy, it virtually eliminates profit opportunities for short-term forex speculation.
Even with significant time and effort, short-term traders struggle to find achievable profit opportunities in a narrowly volatile market. Regrettably, many forex brokers continue to heavily promote high-leverage trading models to attract retail investors with smaller capital. They exploit retail investors' eagerness to profit, exaggerating the potential profits from high leverage while deliberately concealing the substantial risks associated with it.
The combination of a narrow market fluctuation and high-leverage trading has plunged retail investors with small capital, lack of professional trading experience, and a focus on short-term trading into a quagmire of losses. Statistics show that over 95% of these retail investors have suffered losses, with many losing everything.
To curb this reckless trading trend and protect the legitimate rights and interests of retail investors, major countries worldwide have introduced policies to limit leverage in forex trading to lower levels. This aims to reduce market risk and guide the market back to rationality.
However, the implementation of deleveraging policies has, to some extent, accelerated the exit of retail investors from the forex market. The already dwindling retail investor base, hampered by difficulties in making profits, has largely chosen to withdraw from the forex market as leverage is restricted and profit margins are further compressed.
This large-scale exit of retail investors has deprived the forex market of crucial liquidity. Without retail investor participation, trading activity in the forex market has plummeted. The forex market is now as still as stagnant water, lacking any significant fluctuations and unlikely to see the active trading of the past.
As the retail forex market gradually disappears, retail forex brokers that primarily serve retail investors have lost their core reason for existence and have gradually withdrawn from the market. In the current forex market, only a few well-funded professional forex investors remain. These investors have extremely high requirements for the safety of their funds, and only forex banks with strong financial strength and a sound security system can meet their needs for fund security and become their main channel for participating in forex trading.

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13711580480@139.com

+86 137 1158 0480

+86 137 1158 0480

+86 137 1158 0480

z.x.n@139.com

Mr. Z-X-N

China · Guangzhou

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