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COURSE 7: Long-term FOREX trading

Position trading What are the highlights? What do I need to become a position trader? Benefits and drawbacks of long-term trading Position trading What makes this trading style different from others, is that positions are opened for a much longer period - from a few weeks to several years. And chances of a profitable outcome here will depend on a Read more ...

Position trading

What makes this trading style different from others, is that positions are opened for a much longer period – from a few weeks to several years. And chances of a profitable outcome here will depend on a thorough analysis – both technical and fundamental. The quality of your estimates and intelligent choice of opening and closing times of the trade can yield a truly respectable income.

Position trading is pretty close to buy-and-hold investment. It makes you less dependent on the market “wiggling” and some short-term negative factors. You may totally disregard the intra-day or even intra-week movements, thereby cutting off risks that a day trader has to face. This is similar to changing of arms: abandoning incessant shotgun firing and picking up a sniper rifle. Thus choosing to rely more on one’s patience, accuracy and correct choice of a position.

What are the highlights?

The following points will best describe how long-term traders operate:

  • Trading encompasses day- and week-long timeframes.
  • Positions may be kept open for months.
  • Long-term trading requires a considerably higher amount of invested funds, as opposed to intra-week or day trading.
  • When the market is in a correction phase, it may be likely that you miss it – simply because you were not online.

What do I need to become a position trader?

  • Long-term trading involves larger risks, but consequently offers higher potential returns. Normally the required deposit amounts to several thousand dollars. Traders should be ready to expose to risk at least 5% of this money and pay the broker fee for rolling over your positions from one day to the next (this kind of a fee is called SWAP).
  • Emotional decision-taking, greed and fear are the biggest enemies of your success in position trading. Always stay calm, confident and reasonable.
  • It takes an ability to identify trend reversals correctly, as well as recognize the difference between monthly and yearly trends.
  • Position traders will focus on market fundamentals and ignore the so-called “noise”, picking only significant pieces of news for their analysis.
  • You need to know your way around various expert comments, types of market analytics and forecasts.

Benefits and drawbacks of long-term trading

Now let’s consider what this trading style has to offer on the upside, and what are the disadvantages.

Benefits:

  • It gives you a lot of spare time.
  • There’s no intense psychological pressure.
  • Speaking of the potential profit, only position trading allows to take full advantage of the primary, long-term market move.
  • No need for extra rest and recovery (“away from the trading charts”).

Drawbacks:

  • There will be some standstill periods, when no action is required at all.
  • Long-term trading takes a sizable amount of funds.
  • In order to conduct thorough evaluation of the market, one needs a solid knowledge of theory, as well as practical experience.

Bottom line: position trading might be the style for you, if you are a seasoned trader who does not run after quick profits. Other important criteria include strong analytical and data interpretation skills, backed by a good deal of patience and money resources.

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