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Position Trading in Forex

Position trading in Forex is a trading style that means taking and holding a position for a relatively long period of time. “Taking a position” means buying or selling a currency pair. To give one example, if you believe that the Euro is likely to gain over the US dollar, then purchasing “EUR/USD” would be the correct procedure to take.

Of course, how long a position should last that gives it the moniker of position trading in Forex is a matter that is still debated. Generally speaking, position trading in Forex can stretch out for weeks, months, or even years depending on your point of view. And then there is the commonly held view that if you open a position and then hold it for more than a single day, then you are engaging in position trading in Forex.

There are others that argue that if you open a position based on reason that are fundamental in nature and then hold it as long as those fundamentals go without change, you are a position trader in Forex.

If you believe for example that a central bank in a particular country will keep raising it’s rates to coincide with their inflation, buying and holding such currency during that period of time can be known as position trading in Forex. As long as the fundamentals or basics of why you are purchasing the currency remain unchanged, you are establishing a long term position.

Position Trading From A to Z

Position trading in Forex is not a day trading, the difference is that a long term perspective is needed to speculate about the direction that a currency is heading over the course of weeks or months. Day trading on the other hand is focused only on the short term, most often less than a day.

This long term perspective aspect of position trading in Forex also means that how you view news events and the quality of the data is going to be different. You will need to use your trading platform (more info here: trading platform comparison) to analyze the market 24/7 and make decisions. Position trading in Forex requires a long term view so you can position yourself appropriately. Historical trends and long term baselines are your key as opposed to day trading where a single news event can be quickly taken advantage of if it is read correctly.

Starting your career in position trading in Forex begins with understanding the basic market trends, which is the most difficult part of successful trading. While news events are important, it is better to understand historic trends and their long term effect in order to grasp the basic concept of position trading in Forex.

Next, understanding the volatility of the market and how it reacts is vital when taking advantage of setting long term goals. Of course, the higher the volatility of the market between two currency pairs probably means you should avoid that aspect and focus on more steady pairs of currency and study their trends, using past events as a reference.

Position Trading in Forex – Conclusion

Once you have accomplished that, the next step is how much you want to risk. Even the best, most informed traders are going to take a bath on occasion. You will need to be prepared in case the worst happens. So to put it another way, you shouldn’t put all of your eggs in one basket when making position trading in Forex.


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