In today's fierce Forex market, understanding and using the correct Forex trading strategy will be the factor that helps traders succeed. In fact, traders can use many different strategies to trade that are: Scalping trading, Day trading, Trend Following, News Analysis, Price action and Position trading. Inside, Position trading is a strategy with holding positions for a long time and traders will profit from large changes in price.

>> Learn more:  How to choose the correct Forex trading strategy?

 

What is Position Trading?

Position Trading in the Forex market is the trading style with the longest trading time. This trading activity can last from a few weeks to months or even years. Although it is not often used, this Position Trading strategy is quite effective for long-term investment.

Position trading style traders are called Position traders. They often rely on fundamental analysis to identify long-term trends and market conditions, which they use to make informed trading decisions.

Some characteristics of Position Trading strategy

Position trading is a special trading strategy that is completely different from other forex trading methods in the market. Some characteristics of the Position trading strategy that you need to note:

• The period of holding a position in the market can be up to several months or even up to several years. This helps to minimize the impact of short-term fluctuations in the market.

• Offers long-term profits because the advantages are held over a long period of time, allowing traders to take advantage of long-term market trends.

• Trading frequency is moderate but the volume of each order is quite large, each position can be up to 5%. The target is enough to meet the profit expectation R:R>1:10.

• Traders often use fundamental analysis to identify market trends and make trading decisions based on economic data, news events, and company finances.

• Based on the volatile nature of the market, Position trading strategy is considered more suitable for use on the stock market than the forex market.

Advantages and disadvantages of Position Trading

Position trading can be a great way to hold long positions for big profits. However, holding a position for a long time, although potentially profitable, is also very risky.

Here are some advantages and disadvantages of position trading that you should know when using the Position trading strategy.

Advantage

• Traders do not have to worry about short-term price movements, Position trading is less stressful than short-term trading methods.

• Traders don't need to spend a lot of time looking at charts and analyzing price activity, just a few hours a week.

• Get bigger profits than other trading strategies especially if the trend persists into the future.

• Sharks cannot be manipulated on long-term timeframes.

• No spread costs and commission fees.

Disadvantage

• Position trading is only suitable for investors with large capital and investors' capital will be locked for a relatively long time.

• Swap fee (Rollover Rate) is quite large or the trader's account will be eroded.

• An unexpected trend reversal can lead to huge losses for traders. Without regularly monitoring the chart, it is difficult for traders to react to market movements.

• Due to long holding periods, traders often use modest leverage to reduce risk. This shows that the trader must have a large amount of capital in order to generate the predicted profit.

Some effective Position Trading strategies in Forex trading

Position traders often use fundamental analysis to make trading options. However, they use technical analysis tools to confirm trends and identify better entry points. Here are some effective Position trading strategies shared by experts.

Positive correlation strategy

A positive correlation strategy is an investment strategy based on the correlation between two or more different assets. This strategy assumes that assets will move in the same direction or relatively close together in the near term.

For this strategy traders need to pay attention to the correlation between the commodity and the currency pair. If the price of the item increases, the currency will also increase.

Example: Since Canada is an oil producer and exporter, the price of oil will correspond to the CAD/JPY currency pair. In contrast, because Japan is a net importer of oil, the yen suffers when oil prices spike. Therefore, the strength of the oil price becomes the leading indicator of the volatility of the CAD/JPY currency pair.

How to enter a BUY order:

• Step 1: Identify the resistance level on the D1 timeframe oil chart.

• Step 2: Find the candlestick bar breakout from resistance

• Step 3: Enter a BUY position on the CAD/JPY currency pair as soon as the next candle is opened.

• Step 4: Set Stoploss at the support area

• Step 5: Set Take Profit below the next major resistance level after entering the order.

Negative correlation strategy

A negative correlation strategy is an investment strategy in which an investor invests in two assets that are opposite in price. This means that when the price of one asset increases, the price of the other asset decreases. This strategy is often used to minimize investment risk.

This technique uses adverse correlations between the prices of many major currencies and gold. In general, when the price of gold rises, so does the dollar index. When applying this strategy, keep an eye on both the USD index and the gold chart.

To place a BUY order, follow these steps:

• Step 1: Locate support on the D1 period of the USD index chart.

• Step 2: Find the bar that closes below the support level.

• Step 3: As soon as the following candle opens, place a BUY order on the gold chart.

• Step 4: Before placing an order, place a stop loss at the key support level.

• Step 5: Once entered, take profits below the next major resistance level.

How to enter a SELL order:

• Step 1: Find resistance on the USD Index on a daily timeframe.

• Step 2: Look for candlesticks that close above the resistance level.

• Step 3: Enter a SELL order on the gold chart as soon as the next candle is opened.

• Step 4: Before placing an order,set a Stoploss at the critical resistance level.

• Step 5: After entering, set Take-Profit below the next major support level.

Who is the Position Trading strategy suitable for?

Position trading is attractive to beginner traders as it does not require extensive technical analysis capabilities. However, this trading technique is not suitable for all investors, you should only do it when the following conditions are satisfied:

• Take risks

Position trading has a higher level of risk because the investment amount per trade is quite large. Moreover, positions are opened for a long period of time, increasing the risk of a trade being affected by negative news or events.

• Experience and expertise

Extensive experience and high expertise are indispensable for traders, it is essential for traders to be able to make accurate judgments and take timely actions against the volatile fluctuations of the market.

• Patience and Psychology

A long-term position trade, the price may have some ups and downs driven by news and events. Position trading strategy is not suitable for you if you are easily swayed by  Fomo or affected by psychology in trading.

• Investors have large capital

As mentioned, the disadvantage of Position trading is that it requires a large amount of capital to ensure future profits. Therefore, not all investors can meet this condition.

Summary

After answering what is Position trading and having an overview of the strategy. Position Trading is a trading method that uses fundamental and technical analysis to recognize market movements. As you can see,  strategies are not easy to follow, especially for new investors. Therefore, if you want to apply this strategy, you need to understand the knowledge related to the Position trading strategy.

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