When it comes to position trading in forex markets, there's no one-size-fits-all approach. Different traders have contrasting appetites for risk and return ambitions. Which is right for you depends on your trading personality. To help you find the right position trading strategy, we've broken down the best forex position trading strategies in our guide below.
Position trading is a long-term strategy that involves extended holding times. With position trading, forex traders will hold investments for months or - in some cases - years.
Unlike faster-paced forex trading strategies like day trading, position traders are less concerned with daily fluctuations and take a bird's eye view of their position. Position traders are only concerned about the long-term impact of their trade.
Taking a stance akin to investing, position traders must be extremely patient - but also experienced. Forex position traders must understand the fundamental themes that dictate currency pairs' performance as well as the impact economic data has on countries and their outlook.
As forex position trading requires long holding times, stop losses are large. This means your losses can be big. But for those who succeed, profits can be impressive.
Traders can take different positions in forex trading. When you take up a position, this can be either long or short.
Learn more about forex trading fundamentals in our guide.
As well as fundamental analysis, forex position traders also utilise a number of different trading strategies to evaluate potential trends. Some of the most popular position trading strategies for the forex markets include:
Both the 50-day and 200-day moving average indicators can be used to identify long-term trends.
By using trend trading, forex 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.
Support and resistance (S&R) levels are used by forex traders as they signal where a price is heading. Position traders can then choose to open or close a position as they see fit.
Forex position traders can 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 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 that losses can be amplified too.
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.
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.
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.
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:
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.
2. DO be sparing with leverage - As currency pairs can move a few hundred pips in a day, it’s crucial to be able to ride out daily volatility without triggering a stop-loss.
3. DO look out for rollover - While forex 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.
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 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 crypto, commodities, stocks and indices with us. Make sure you head over to our expert hub beforehand though.