A forex position trader is a type of trader that takes trades lasting for extended periods, usually taking advantage of large swings in the market. Rather than holding a trade for a few hours or days like most other traders, a position trader may hold their trade for weeks or even months. This type of trading requires a different skill set and mindset than other types of trading, as the focus is on long-term analysis and predictions rather than short-term price movements. You can read more about forex position trading here.
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Solid understanding of technical analysis
A position trader must have a strong understanding of technical analysis, which will be the primary tool you use to predict future market movements. It includes being able to identify and interpret chart patterns, as well as using indicators to gauge momentum and trends.
Ability to think independently
Position trading requires thinking independently and making decisions based on your analysis rather than following the herd. It means being comfortable with taking risks and being okay with the occasional loss, as no trading strategy is perfect.
One of the essential qualities for a position trader is patience. Not only do you need to be patient when waiting for trades to be set up, but you also need to be patient when holding trades. It means being comfortable sitting on the sidelines, even if the market is moving.
Another important aspect of position trading is risk management. Since you will be holding trades for extended periods, managing your risk to avoid significant losses carefully is essential. It includes setting stop losses and taking profit at predetermined levels.
Last but not least, position traders need to have the self-discipline to be successful. It means sticking to your trading plan and not letting emotions influence your decisions. It also means patience and waiting for the perfect trade setup rather than taking every trade.
How to become a forex positions trader
Develop a trading strategy
The first step to becoming a forex position trader is to develop a trading strategy. This strategy should be based on sound technical analysis and tested thoroughly before implementing it in live trading.
Find a broker that suits your needs
The next step is to find a broker that suits your needs. It includes finding a broker that offers low commissions and tight spreads. Finding a broker that can trade on leverage is also essential, as this will be necessary for position trading.
Fund your account and begin trading
Once you have found a suitable broker, you need to fund your account and begin trading. It is essential to trade small position sizes to limit your risk when starting, and you can increase your position sizes as you become more comfortable with the strategy.
Monitor your trades and adjust as necessary
Once you have begun trading, it is crucial to monitor your trades closely and make adjustments as necessary. It includes ensuring your stop losses and adjusting your position sizes as needed.
Take profits at predetermined levels
Finally, taking profits at predetermined levels is essential once you have a trade-in profit, and it will help you lock in profits and avoid giving them back to the market.
Risks of being a forex position trader
Certainly, there are risks of being a forex position trader. These include:
The risk of significant losses
One of the risks of being a forex position trader is the potential for significant losses. It is because you hold trades for extended periods and are exposed to the market for a long. You can mitigate this risk by doing careful technical analysis before opening a position.
The risk of missing out on big moves
Another risk of being a forex position trader is missing out on big moves in the market because you are not actively trading all the time and may miss out on some good opportunities. If you want to mitigate this risk, you can monitor markets more closely.
The risk of boredom
Boredom can occur when you are not actively trading all the time because you may find yourself waiting for long periods for trades to set up. In this time, you can read up more on forex trading to familiarise yourself with different trading instruments and tactics and hone your skills.
The risk of overtrading
Overtrading is another risk that can occur when you are position trading because you may feel the need to take every trade that comes along, even if it is not a good opportunity. Self-control plays a key role here, and self-mastery can help you alleviate this risk if you’ve got a good hold of yourself.