Position trading is the longest time-frame trading strategy. Under such contracts, trades can last for multiple months to even several years. Investors who choose this trading method, ignore any types of short-term movements to fully exploit longer-term trends. It is this kind of trading that is most analogous to investing. Investing in position trade refers to holding positions for a longer-term than that of other strategies.
This type of trading strategy is booked for super patient investors and it requires a profound understanding of the basics. Because this strategy is all about holding positions for a long time and this holding period sometimes becomes extra-long. That’s where different fundamental themes enter the picture and demand traders’ attention.
Fundamentals govern the long-term movements of currency pairs and it is crucial for a trader to understand how different financial data affects different countries and their future perception. For the elongated holding times of the trades, the range of stop losses will be highly large. It means that their losses can highly large. This also means that an investor’s losses can wind up being huge devastation, but it also refers that one’s profit can also be huge.
The investor should make it certain that he is well-capitalized, or he will be more likely to receive margin called.
For a concept of how much cash a trader in the United Kingdom should have in his account, he should check out his money management and risk management strategy and lesson. A trader will also require thick skin as it is nearly guaranteed that his trades will turn against his expectation at a point while he is trading this method.
Types of Positions
While different fundamental analyses play a large role for all the position traders, that doesn’t refer that technical analyses aren’t used.
Position traders are likely to use different fundamental and technical analyses to find out a potentially profitable trend.
Below are some of the effective trading methods which deploy technical analysis that most traders use:
1. Trading Trend Deploying Moving Average
The 50-day and 200-day moving averages are a great indicator of significant technical markers for traders. If you deal with the commodities, you can even find the long term trend in the market. The reason behind this is because of the fact these moving averages depict significant long-term moves.
Look for the cross in the 50 day and 20 day MA to predict a new move in the market. When both averages intersect with each other, it implies the possibility of a new trend.
When the first one that means the 50-day MA goes below the second one, the 200-day MA, this pattern is called the “Death Cross”.
When the first one intersects above the second one, it will be termed as the “Golden Cross”.
Support-and-resistance levels can indicate where the price is heading, providing traders wisdom on whether they should open or end a position.
A bolster level is merely a price level that historically does not plummet. These types of historical bolster levels can persist for years.
A defiance level is another price level that historically more likely to be breakable. These types of historical resistance can also persist for several years.
If speculators want a long-term defiance hold, they should end their positions before unrecognized levels start melting away.
This method requires investors to analyse different chart patterns. When inspecting those charts, traders should consider different factors when attempting to recognize bolster and defiance levels.
Breakouts are amazing indicators of a new trend. A breakout is a point where the price of a currency crosses well-defined support-and resistance lines. The concept behind breakout trading is to initiate a long position after the opening of a short one when the price crosses below the bolster line.To trade breakouts successfully, traders need to be confident in noticing periods of bolster and defiance.