Trading Positions

Position trading is the longest-term trading, with trades lasting anything from a few months to many years!

Short-term market swings are ignored by position traders in favor of identifying and benefitting from longer-term trends.

This is the form of trading that is most similar to “investment.” The key distinction is that “investing” in markets other than FX usually entails holding long holdings.

This type of forex trading is just for the most PATIENT traders, and it necessitates a thorough study of the fundamentals.

Because position trading is held for such a long time, fundamental themes will be the primary focus of market analysis.

Fundamentals determine the long-term patterns of currency pairs, thus it's critical to know how economic data impacts your countries and their prospects.

Your stop losses will be very substantial due to the long holding time of your trades.

This indicates that your losses could be significant, but your gains could be yuuuuge (“big” in Trumpglish).

You must ensure that you are well-capitalized, or your margin will most likely be called.

Check out our risk management lesson to get an idea of how much money you should have in your trading account.

Position trading also necessitates a thick skin because your transactions will almost certainly go against you at some point.

These aren't going to be minor retracements.

You may face large fluctuations, and in order to be calm, you must be prepared and have complete faith in your analysis.

Position Trading Types

While fundamental analysis is more important to position traders than technical analysis, technical analysis is still used.

Position traders examine possible trends using both fundamental and technical analysis.

Position traders employ the following technical analysis-based trading strategies:

Using Moving Averages to Trade Trends (MA)

For position traders, the 50-day moving average (MA) and 200-day moving average (MA) indicators are important technical indicators.

This is owing to the fact that these moving averages depict major long-term patterns.

When the 50-day MA and the 200-day MA cross, it indicates the possibility of a new long-term trend.

The “Death Cross” occurs when the 50-day MA crosses below the 200-day MA.

The “Golden Cross” occurs when the 50-day MA crosses above the 200-day MA.

Position traders use these longer-term MAs as chart indicators.

Trading Support and Resistance (S&R)

Support and resistance levels can help traders decide whether to open or close a position by indicating where the price is headed.

A support level is a price level that has never been broken in the past. These “historical” levels of support might last for years.

A resistance level is a price level that has historically proven difficult to overcome.

These “historical” levels of resistance might last for years.

Position traders might close out their positions before unrealized profits start to disappear if they expect long-term resistance to persist.

If they believe a long-term trend will hold and continue upward at this point, they may also enter long positions at historical support levels.

Traders must analyze chart patterns in order to use this approach. When attempting to find support and resistance levels on a chart, position traders consider three factors.

• When it comes to finding support and resistance, the historical price is the most dependable source. Recurring support and resistance levels are simple to notice during periods of major up or down in a market.

• Previous levels of support and resistance can be used to predict future levels. Once a resistance level has been broken, it is not uncommon for it to become a future support level.

• Moving averages and Fibonacci retracement are technical indicators that provide dynamic support and resistance levels that move with the market.

Trading Breakout

Position traders might benefit from trading breakouts since they can signify the start of a new trend.

This strategy is used by breakout traders who want to get in on the ground floor of a trend.

When the price goes outside of predetermined support or resistance levels (ideally with higher volume), this is known as a breakout.

Trading breakouts involves opening a long trade once the price breaks above resistance or a short position after the price breaks below support.

To trade breakouts successfully, you must be comfortable identifying times of support and resistance.

Trading Pullbacks

A pullback is a brief dip or reversal in the current trend.

When there is a brief market dip in a longer-term trend, this method is adopted.

Traders who trade pullbacks hope to profit from market pauses.

The pullback approach is based on the following concept:

• To purchase low and sell high before a market dips, and then to buy again at the new bottom for long trades.

• To sell high and purchase low before a market momentarily rallies, and then to sell at the new high for short trades.

If done correctly, a trader can profit from a long-term trend while also avoiding potential market losses by:

• Selling high and purchasing low (for long trades).

• Buying on the cheap and selling the rips (for short trades).

Retracement indicators, such as the Fibonacci retracement, can be used to assist identify probable pullbacks.

You might be a position trader:

• If you are an independent thinker,. You must be able to disregard popular opinion and make intelligent judgments about the market's direction.

• You have a strong grasp of fundamentals and a clear sense of how they will affect your currency pair over time.

• You have a thick skin and can withstand any retracements that come your way.

• If the market goes against you, you have enough capital to absorb several hundred pip losses.

• You're not bothered by the prospect of having to wait for your prize. Long-term forex trading can provide hundreds of pips to thousands of pips.

• Consider switching to a shorter-term trading technique if you become thrilled about being up 50 pips and want to terminate your transaction right away.

• You have a lot of patience and are very calm.

You may not be a position trader if:

• If you are readily affected by popular market opinions,

• You lack a thorough understanding of how fundamentals affect markets over time.

• You aren't a patient person. Even if you are patient, this may not be the best trading strategy for you. When it comes to being this patient, you have to be the ultimate zen master!

• You don't have enough money to get started.

• When the market works against you, you don't like it.

• You enjoy seeing your outcomes as soon as possible. You might not mind waiting a few days, but several months, if not years, is simply too long.