What is Position Trading
Trading is the act of engaging in the selling and buying of any financial assets in a market. Sometimes in trading, there is usually a broker whose work is to mediate between the buying and selling. Traders hold assets for a short period to capitalize on short term trends. Most people refer to position traders as buy and hold traders. The buy and hold traders are a type of stock traders. They hold long term positions and believe that their investments will smoothen fluctuations. The goal for the position trading is to profit from the primary trend other than fluctuations for the short term.
Due to the long time hold back time of the trades, the stop losses become significant. If not well capitalized, you will get a margin call. That happens when you log in to your mini account, and your “equity” column is equal or less than the “used “margin.
It will be easy for you to become a Forex position trader if you have the following:
- Determination – You should have a strong determination to persevere through. Sometimes your traders, at one point or another, might go against you so you must have complete trust in your analysis.
- Capital – You should have enough capital for you to be able to endure if the market gets to be against you
- Patience – You should be a calm person who has enough patience.
- Independent thinker – You should be an independent thinker who can ignore all popular opinions and make your guesses or opinions about where the market might be going.
- Good understanding – Must have a good understanding of how everything should be run and not a person who just gives in to anything.
Pros and Cons of Position Trading
Position trading is being used a lot by the professional traders. They use it to keep their money safe thus keeping it away from market volatility. But with all this, there are advantages and disadvantages for the position trading.
Advantages of position trading
- Less stress – comparing the position traders and other kinds of traders, they have less stress. They can trade their market with time since it is long term not like the day traders who have a short time. The day traders are at a high risk of market volatility.
- No early trades exit – position traders do not release their trades early like the day traders who have to with a loss.
- When compared to day trading, it is less time-consuming trading
- Does not take much capital like day trading to make it successful.
- It is more profitable than others.
Disadvantages of Position Trading
- The long length of time can make the traders get a draw down thinking that it might turn around and start trending.
- There is a risk of keeping the trading positions open because there can be a significant change that might take place overnight.
Position trading strategies
There are different approaches one can take to be able to have the longest and strongest Forex trends.
- You need to choose currencies that have been active and gaining over the recent years, mostly three months. Thus you will buy what is going up and sell the ones going down.
- Just have one to four to be the currency pairs that you can trade easily.
- If the trade is going well on your side, wait till it retraces back to the entry point but if it doesn’t bounce back, exit the trade.
- You should decide on the percentage of your account that you can risk on every trade.