Forex Position Trading Strategy Explained
Position trading in forex is a type of trading focused on long-term opportunities. Trades can extend over a long period of time, sometimes months or even years—ideal for those aiming to buy and sell strategically. Position traders usually disregard short-term price movement, focusing on substantial long-term price movement trends for profit instead. Position traders often liken it to investing, yet it offers flexibility: you can open a short with equal ease.
This type of trading demands patience and a firm understanding of fundamentals and technical analysis. It suits a successful position trader who excels at trading CFDs and forex effectively. Position traders usually excel in these extended strategies. Position traders may need to adapt to unexpected market shifts. Below, we’ve detailed proven strategies to enhance your success. Many accounts lose money, but with Tradu, you can improve your outcomes.
Position trading strategies for forex: What we’ll cover:
Position trading offers a long-term approach with extended holding periods. Forex traders can leverage this type of trading for significant gains.
Position traders focus on major trends, not daily shifts, unlike other trading strategies like day trading, swing trading, or scalping. We’ll explore ways to spot these trends effectively. Position traders may find opportunities where others see noise.
Patience and expertise drive success here, much like investing. You'll learn how to combine technical analysis with fundamentals and economic data for smarter trades.
Long holding times mean wider stop losses with forex and CFDs. This high risk approach can lead to substantial losses, but a successful position trader can reap impressive rewards despite the high risk nature.
What is long and short position in forex trading?
Traders can take different positions in forex trading. When you take up a position, this can be either long or short.
- Long position - If you think the price of a currency is set to increase, you will go long or 'buy'.
- Short position - If you think the price of a currency will go down, this is called going short or 'selling'. For example, you might open a short position when you anticipate a currency’s value dropping due to economic shifts.
Learn more about forex trading fundamentals in our guide.
What are the best forex position trading strategies?
As well as fundamental analysis, position traders also utilise swing trading and other trading strategies to evaluate potential trends. Some of the most popular position trading strategies for the forex markets include:
Trend trading using moving averages
Both the 50-day and 200-day moving average technical indicator can be used to identify long-term trends.
By using trend trading, position traders can analyse long-term trends as they emerge.
When a 50-day moving average intersects with a 200-day moving average, this indicates to forex position traders that a new trend may be ripe for opening a position—whether to buy and sell at the right moment.
Support and resistance trading
Support and resistance (S&R) levels help traders identify support and resistance levels that signal where a price is heading. Position traders can then choose to open or close a position as they see fit.
- Support levels - A price level that a currency does not fall below.
- Resistance level - A maximum price level that is not typically broken.
Position traders usually use support and resistance levels to decide whether to open, hold, or close their positions. For example, if traders expect a long-term resistance hold, they can exit their position before profits are lost.
Breakout trading
Breakout trading is used by forex traders as trading breakouts often signify the opportunity to start a new trade. If forex traders can open a position in the infancy of a trend and hold positions, profits can be significant, but bear in mind this high risk strategy means losses can be amplified too—especially in forex and CFDs.
You can spot a breakout by looking at whether the price moves outside resistance levels. Once you've spotted a trading breakout, you can open a long position as the price breaks above resistance or even open a short if the trend reverses unexpectedly.
Pullback trading
A pullback is a momentary relapse of an emerging trend. Where there is a short dip in a longer-term trend, forex position traders can use this strategy to buy while the price is low and sell when the market is high.
Range trading
A popular tactic with forex traders is range trading. This trading method allows you to make profits from a volatile market. As forex markets are unlikely to have a clear, obvious trend, this makes them prime candidates for range trading—something position traders often excel at.
To range trade, you must first identify an overbought or oversold asset. Then, you would buy the oversold assets and sell the overbought ones.
You can tell which is which by following this principle:
- Oversold = assets are approaching the support level
- Overbought = assets are approaching the resistance level
How to trade forex in longer-term positions
Every forex position trading guru will enter and exit positions slightly differently. Although every trader has a different approach (as there are so many strategies to choose from), there are some general guidelines. Here's how to give your long-term forex positions the best chance of success:
1. DON'T be emotional - Although it can be hard to leave your emotions at the door, it's crucial that you do. With the right attitude, strategy and a bit of luck, even failing trades can turn around. By taking the emotion out of forex trading, you're less likely to exit a position prematurely and lose out on potential profits—a trait of a successful position trader.
2. DO be sparing with leverage - As currency pairs can experience significant price movement of several hundred pips in a day, it’s crucial to be able to ride out daily volatility without triggering a stop-loss, however, you must note that trading on leverage can magnify your profits as well as losses.
3. DO look out for rollover - While position trading can bring plentiful profits, it's important to pay attention to rollover - the overnight holding fees which can eat into your margins if you're not careful. When considering your forex position trading strategy, be sure to account for these as part of the process, especially when trading forex and CFDs.
Start position trading forex with Tradu
Learnt the basics? Now it's time to put your forex position trading strategy into practice with Tradu. Here's how:
1. Open your Tradu trading account: You can sign up for an account with us in a few minutes.
2. Check out to our expert guides: Head over to our expert hub to learn all about forex, markets and trading strategies.
3. Pick a strategy: Once you've studied our resources, choose your strategy and stick to it.
4. Start trading: Once you're ready to open a position, head over to our advanced trading platform to make the most of the incredible features.
5. Diversify: Fancy a new challenge? Diversify your portfolio and trade listed stocks and CFDs on commodities, stocks and indices with us. Make sure you head over to our expert hub beforehand though.