Trading positions might be the most extended type of trading since it lasts for months to even several years. Hence, we can closely compare them to investments because of the time a trader spends and waits for a single trade. Forget about short-term trades and fats profits. Position trading is all about earnings from long-term trends.
Fundamentals and position trading
Trading positions can always be linked to two things: patience and fundamentals. Fundamentals came into the picture because one needs to analyze the markets further since position trading involves longer time frames. Fundamentals are the ones that have the final say on currency pairs’ long-term trends. A position trader must know a lot about his country’s economic data and how that can impact his country’s future outlook.
Stop losses and position trading
Longer-term trades are almost always synonymous with huge stop losses. At the end of the day, huge profit possibility comes with huge risks, right? Before position trading, make sure that you have the right amount of capital not to get margin called. There are risk management lessons that you can take to know how much capital you should have per position trade you are interested in making.
Disclaimers for position trading
Position trading demands great courage because trades will most likely go against your favor sometimes, and the retracements can also be significant. To aim for great profits is also like entering a great gamble.
Different types of position trades
While it is true that position trading is mainly about fundamental analysis, a trader can also throw in some technical analysis to help in the decision-making. The combination of these two can work best. Here are some strategies that can help you if you decide to try and place a position trade:
- Trend trading by using moving averages
- Support and resistance trading
- Breakout trading
- Pullback trading
Is position trading the right style for me?
To start with, you must be really patient if you want to try position trading. They say that the longer time you wait for something, the more you can appreciate it when it finally arrives. That phrase strongly applies to position trading. It would be best if you do not get too excited when you see a 100 pip profit since it is nothing compared to that thousand pip that you might have in the future. You should have a broad knowledge of fundamentals that gives you an idea about the currency pair’s outlook in the future. Also, if everything goes wrong and you lost hefty pips, it should not break the bank.
On the other hand, you should think twice about position trading if other people’s opinions easily influence you. Do you know a lot about fundamentals and their impact on the market? Are you a patient person? Do you have enough money in your account? Can you stay calm if the market goes against your favor? If you answered no in most of the questions, position trading might not be in your best interest.