To resolve the difficulties in deep hole finishing technology, a deep hole polishing method based on magnetic compound fluid (MCF) with a needle type polishing head was proposed. Different magnetic field combination models of permanent magnet were established by using the COMSOL Multiphysics finite element software. According to the simulation results, a needle type polishing head with uniform magnetic field distribution and sufficient strength was designed. Then, a coupling model of magnetic fluid field during MCF deep hole polishing was established to analyze the flow characteristics of MCF. Taking brass H62 as processing object, the process of deep hole polishing with magnetic compound fluid was studied. The simulation results are consistent with the experimental results. The results show that when the needle type polishing head adopts the longitudinal single row magnetic core structure, using 800 r/min rotating speed, 3 mm polishing gap, and 48 μm particle size of hydroxy iron powder, the surface roughness is 0.13 μm, and the material removal rate is 0.025 mg/min, the polish effect is best.