How to do Position Trading: Your Short Guidebook

Among the different types of trading strategies, position trading is considered the longest term. In fact, as a position trader, you can have trades that can last from several months to several years.

It goes without saying that this kind of trading is only for traders who have a never-ending supply of patience for the market. More importantly, this style demands a sound and profound understanding of market fundamentals.

Breaking Down Position Trading

In position trading, you hold the position for a long, long time. That implies that Finance Brokerage Education the fundamental themes will be considered your predominant focus when you analyze the markets.

Why are fundamentals that important? It is because fundamental dictate the longer term trends of different currency pairs. Failure to understand the concept of how Forex Trading Guide economic data affect the countries and currencies that you’re trading with can lead to disastrous loss-making trades.

As for the stop loss orders, you probably have guessed that they will be very large, again due to the lengthy holding period. It follows that you should be well-funded unless you want to get a margin call.

Another thing you have to consider is having a thick skin. That’s because it’s almost certain that your trades will not go the way you want them to all the time. We mean the trades will turn around and bite you at one point or another.  

And we’re not only talking about short retracements.

It’s possible for you to experience large swings so you should be ready. Try to have absolute trust on your analysis if you want to remain calm during such times.

The Qualities of Forex Position Trader

If you want to be a forex position trader, you definitely have to be an independent thinker. You have to be willing to veer away from popular opinion, or ignore it altogether, to make your own educated guesses when it comes to the future of the market.

If you want to be like that, you have to be willing to hit the books and study fundamentals, which give you some amount of clues as to where the market is going. As a position trader, you need to have a very excellent understanding of such fundamentals. And you should have a good foresight into how such fundamentals will affect your currencies in the long run.

Of course, you also have to be strong enough to face retracements. If the market against you, make sure you are ready to face it with a capital large enough to withstand several hundred pips.

Perhaps the most important quality of all is that you should be willing to wait for your reward for several years. You cannot be a position trader if you don’t have this amount of patience. And patience goes both ways. You should not be too anxious to exit a trade when you’ve already loss some, and you shouldn’t also exit it when you’ve gained maybe around 40 to 50 pips.

Overall, the main requirement is to be incredibly patient and extremely calm.