Finance

Mastering the key techniques of position trading strategy

Many traders are familiar with the terms ‘day trading’ or ‘short-term trading’. But not many know about position trading. Position trading holds an important part in the trading market and has played a vital role in making the market more dynamic and upfront. As the Forex trading market is highly volatile, this strategy is becoming popular day by day.

So, if you want to know more about this comparatively unknown strategy of Forex trading, stay tuned until the very end because it might unleash new prospects in your Forex trading portfolio.

First of all, let’s have a glimpse of what position trading truly is.

Position trading

Position trading is a strategy where traders keep hold of their stocks for a long duration. So, just like its name, traders tend to remain in their unchanged position for a long time. Traders can remain in the same position starting from weeks to months or even years. Shocking, right? Yes. However, there are valid reasons for staying confined in one position.

As we all know, the Forex trading market is prone to price fluctuations within a short period. So, even though currency traders get high trading opportunities, they tend to face a huge number of risks. And if these risks are not managed properly, they can cancel out the profits earned from the previous deals. In day trading, the risk of losing money is high even though a trader doesn’t need to provide much time to conduct a trade. But those who trade options in UK should learn the basics first. If they intend to use the position trading method first, it will be a tough challenge to survive.

In position trading, a trader can stay in the same position before deciding to sell or buy his stocks. When a trader remains in an unchanged condition for long, it enables him to observe the market psychology better than other traders. As he doesn’t need to think about making his trades anytime soon, he is relieved from many workloads like executing his trades or analyzing the best-selling point. So, with the leftover time, he can engage himself in studying the market and technical analysis. And later, with a clearer understanding of the Forex market, he can find out the right time to expand his trade.

Now just like any other trading strategy, position trading also comes with some advantages and disadvantages. So, we will get to know about the pros and cons of this strategy one by one.

Advantages

1. Less stress

The biggest facility that the position traders enjoy is to trade with less mental stress. Traders suffer from mental stress when it comes to making a decision. Many traders even suffer from indecision due to the dilemma of choosing the right trading option. Many may face problems in finding the best way of exiting a trade or even executing the trade properly. However, in position trading, the stress level is comparatively less and traders don’t have to worry about monitoring the market all the time.

2. Less monitoring

Since traders don’t need to trade daily, looking at the small details of the price charts is pretty much useless for them. They only need to remain updated about the ongoing trends according to their preferred time frames. Position traders mainly use their time to develop as a strategist rather than looking at the monitors for long.

3. Immune to market fluctuation

Since position traders use higher time frames like weekly time frames, price fluctuation decreases by a lot. As their trades remain open for a long time, there are small chances of their trades being influenced by the market volatility.

Disadvantages

1.Less opportunities

Since traders here have to remain engaged in a single trade for a long time, they don’t get frequent opportunities for investing. This is one of the reasons why traders don’t feel attracted to use this trading strategy.

2. Broker time limit

Brokers often impose a time limit on position trading and as a result, traders become obliged to close their trade at a loss against their will. Selling stocks before the right time may decrease the profit level in position trading.

But even with these disadvantages, it is much safer to use position trading if a trader is looking for investment security.

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