Forex day trading is not for everyone, because it is a time-intensive job that requires your fullest attention. However, if you do not want to part with your current day job, but still like to profit from the forex market, then position trading might be perfect for you.
Think of position trading like long-term investing, except that if the market is bearish (the prices are going down), you can still profit. How is that even possible? Forex trading allows you to buy long (betting that the price will be higher) or buy short (speculating that the price will be lower).
Let’s get started with position trading
In the forex market, there are times of great volatility. This happens at certain times:
- When central banks are open in their respective timezones,
- When the forex market opens after the weekend,
- When economic news is released
- When other news is released (geopolitical, company financial reports, etc)
At these times, the market can move up to 20-50 pips within a span of a hour, and day traders flock around the minute of extreme price fluctuations to gain the most profit. However, position trading doesn’t do this, but they rather look at the long-term price movements.
They typically aim for 200-400 pips of movement within a span of weeks to several months. Some traders even hold a position for a few years — hence the term position trading is used. At a greater scope, the above price volatility will seem like insignificant noise.
Since the forex market prices are determined by trader sentiments, and traders are typically human beings that react to short-term stimuli, long-term position trading can be said to be less prone to short-term psychological influence.
How do you win at position trading?
Position trading isn’t less risky than day trading, but this depends on how you define what risk is. For some unfortunate position traders, they have picked a relatively stable currency pair and time that is too long to hold the position. As a result, for the time that was spent to hold the position, they do not have a significant amount of earning.
In this case, the trader doesn’t necessarily risk a loss in the initial investment, but loss in the time and other trading opportunities. To reduce this risk, it is wise to practice technical analysis. Yes, technical analysis is not just limited to day traders, but is also very useful for long-term position traders.
Technical analysis using the exponential moving average at 50, 100, and 200 points (EMA50, 100, 200) for example, can help you ignore the noise in the market. Market price level is also another useful metric to gauge whether the price is likely to rise or fall.
More FBS Forex tips and strategies
FBS is an online trading platform, an international forex trading company that accommodates all kinds of traders. FBS educational content, which you can find in their website, is filled to the brim with a lot of forex tips and strategies. Visit their website for more incredibly diverse content.
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