Showing posts with label Forex Trading Styles - Position Trading. Show all posts

Forex Trading Styles - Position Trading,iphone forex,iphone forex app

Forex Trading Styles - Position Trading

In Forex, the term "position trading" is somewhat misleading. That's because both of the terms involved are the total opposite of each other. Traditionally, "position" investments are those which are held for the longer term. Traders wait for the market to move significantly before closing out their "position".

On the other hand, trading is often the quick movement of money. In Forex, a "trade" could be a buy and sell executed on the same currency pair within about 20 minutes of each other. In other words, "traders" are cyclically trading in and out of different currencies in order to scalp as many pips as they possibly can, as quickly as possible.

Benefits of Position Trading

Position trading often sets the trader up for significant profits, and a greater chance of realizing a winning trade. This is because short term market moves are completely disregarded, with the overall sentiment of the market in the long run being the only focus.

To illustrate this, let's give an example of a position trading strategy:

Trader believes that EUR/USD will appreciate in the long run.
Based on a weekly chart, the trader goes LONG the EUR/USD.
Within 2 months, the pair has reached the target (after many other short term moves).
The trade is closed based on a signal from the weekly chart.

The concept is simple. Many people will have heard of "buy and hold" strategies. Position trading is essentially the same, except for the fact that you can "sell and hold" also.

Effects of Overnight Interest

One of the concerns for position traders is whether they are on the positive or negative side of the trade. Overnight interest is the cost of holding an open Forex position after the close of trade - i.e. the financing cost of that position.

Therefore, before entering a position trade, it is important that you calculate the costs of carry (overnight interest) - to ensure that this won't eat in to your long term profits. The last thing you want it to have a profitable trade which is completely disintegrated by the overnight financing costs after 2 months of holding the trade open.

Most brokers are open and transparent in this respect, so check with them to see whether you will be receiving or paying interest on open positions in your chosen currency pair.

Forex Trading Styles - Position Trading

Amount

Forex on Iphone,iPhone Forex,iPhone Forex trading software,iPhone Forex Trading

Forex iPhone, Forex iPhone