Position trading is a longer-term trading approach where you can hold trades for weeks or even months. The timeframes you’ll trade on are usually the Daily or Weekly. As a position trader, you mainly rely on fundamental analysis in your trading (like NFP, GDP, Retail sales, and etc.) to give a bias. Also, you might use technical analysis to better time your entries.
Let's Say You analyze the fundamentals of EUR/USD and determine it’s bullish. But, you don’t want to go long at any price. So, you wait for EUR/USD to come to Support before taking your position. Now if your analysis is correct, you could enter at the start of a new trend before anyone else.
Now, let’s discuss the pros and cons of position trading…
Don’t need to spend much time trading because your trades are longer-term Less stress in your trading as you’re not concerned with the short-term price fluctuations A favorable risk to reward on your trades (possibly 1 to 5 or more)
Require a firm understanding of fundamentals driving the market Need a larger capital base because your stop loss is wide May not make a profit every year because of the low number of trades And lastly… There’s a trading strategy called Trend Following (which is similar to position trading). The only difference is Trend Following is purely a technical approach that doesn’t use any fundamentals.
As a swing trader, your concern is to capture “a single move” in the market (otherwise called a swing). So you’ll likely:
Trade the bounce of the moving average
Thus, it’s important to learn technical concepts like Support & Resistance, candlestick patterns, and moving average.
Now, let’s discuss the pros and cons of swing trading…
Don’t have to quit your full-time job to be a swing trader It’s possible to be profitable every year because you have more trading opportunities
Won’t be able to ride big trends Have overnight risk Now, if you want to learn more about swing trading, then The Complete Guide to Finding High Probability Trading Strategy will help immensely. Let’s move on.
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