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Position Trading Strategies | Long-Term Forex and CFD Stock Trading - YouTube
Channel: The Secret Mindset
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Hello guys, in the following minutes I want
to discuss the basics of the position trading,
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the advantages of adopting this trading style
and we will also see 3 position trading strategies
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you could implement right away.
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Position trading is a trading technique which
looks at the bigger picture of the market,
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usually involving a combination of technical
analysis and fundamental analysis.
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When evaluating the markets, position traders
usually make their research on weekly and
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monthly price charts.
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Iâm sure you already know that 95% of all
traders lose money and only 5% of them make
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any real money.
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This is due to the fact that the majority
of traders enter the markets with a âget
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rich quickâ mentality.
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Short-term trading can be profitable, but
on the long run youâll be safer when adopting
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a position trading attitude.
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When executed correctly, position trading
comes with several advantages:
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The most important advantage of the position
trading eliminates market noise
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Sometimes when trading on shorter time frames
you get caught up in the market price fluctuations,
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rumors or the constant monitoring of the market.
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Thatâs market noise.
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Position trading on higher time frames will
help you to remove the market noise and to
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extract the correct information from the price.
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Another advantage is the flexibility
While day traders monitor the price action
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very closely and their âscreen timeâ is
considerably higher, position traders donât
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have to deal with such problems.
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Position trading offers time away from charts.
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Also, position traders execute fewer trades
and they donât have to monitor the trades
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all the time.
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Another advantage of the position trading
is that you donât over trade
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Position trading keeps you away from the daily
âtemptationsâ of entering and exiting
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the market many times thought the day.
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Position traders do not trade actively and
execute fewer trades.
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Also, position traders donât have to deal
with the daily stress arising from trading,
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thatâs because their positions have plenty
of room to survive the market volatility.
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Another important advantage of position trading
is the fact that signals are more relevant
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on higher time frames
Position traders often use the daily, weekly
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and monthly charts.
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They are not interested in analyzing lower
time frames.
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This adds weight to their trading systems.
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A divergence is much stronger on the weekly
chart than on a 15-minute chart.
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A moving average crossover has more relevance
on the daily chart than on the 5-minute chart.
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By using higher time frames position traders
improve the quality of their trades.
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Now that we discussed the advantages of position
trading, letâs see a couple of strategies
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used by position traders.
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An efficient position trading strategy is
divergence trading on the weekly/monthly charts.
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Divergences are more reliable on higher time
frames because the market does not move as
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fast and it is easier to define trends.
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By trading divergences, the position traders
see the patterns developing and have time
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to make the correct decisions.
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In this weekly gold chart, we spotted an excellent
hidden divergence opportunity.
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The gold price recorded a strong upward trend
and retraced to the 23.6 Fibonacci retracement
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level.
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During this time, a hidden divergence pattern
developed on the stochastic oscillator.
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This represented a perfect buy for a position
trader, the gold price continuing its upward
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trend.
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A similar pattern is seen in this aussie dollar
weekly chart.
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After 4 months of price increases, the market
retraced to 38.2 fib level.
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The stochastic indicator showed a hidden divergence
around that area, representing a good buy
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opportunity for a position trader.
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The price indeed rejected that area and continued
its upward trend for the rest of the year.
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On the Apple stock chart, we found this pattern
once again.
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The Apple price was in a strong upward trend
on the weekly chart.
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The price retraced to 38.2 fib level.
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This move, combined with the hidden divergence
on the stochastic oscillator represented a
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great opportunity for a position trader.
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As you can observe from these examples, the
hidden divergences represent a reliable tool
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for position traders on the higher time frames,
generating high probability signals.
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Another viable strategy for a position trader
is the carry trade.
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The carry trade is an interesting forex long-term
strategy that is based on the difference in
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interest rates around the world.
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Itâs a strategy through which a position
trader sells a certain currency with a low-interest
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rate and uses the funds to buy a currency
with higher interest rate.
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By executing a carry trade, the position trader
intends to generate profit from the difference
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in interest rates between two countries.
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Also, with an appropriate approach, the position
trader aims to benefit not only from the difference
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in interest rates but also from the changes
in the exchange rate.
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Hereâs an example, the Aussie dollar/ and
the Japanese yen on the monthly timeframe.
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Thatâs a good carry trade opportunity because
there is a big difference between interest
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rates of the 2 countries, so we could make
a profit in the long term from the swap.
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After we determined the main monthly relevant
support and resistance and potential price
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patterns we identified a possible long position
in the direction of the prevailing upward
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trend, after the price rejected the 38.2 fib
level.
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A long entry on the currency pair would be
a safe entry, considering the long term.
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The long position on the instrument is related
to a positive swap, and thus the profit of
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such a transaction would be even greater if
the currency pair will continue to move upwards.
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Another position trading strategy involves
moving averages.
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The moving averages are probably the most
well-known and heavily used indicators in
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technical analysis because they effectively
captures the trend of a financial market in
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an easily identifiable manner.
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Position traders often use moving averages
for identifying and confirming support and
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resistance levels.
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A crossover between 2 moving average is probably
one of the most well-known technical analysis
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signal used by traders.
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The strategy is simple, position traders trade
moving averages, one with a shorter period
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and the other with a longer period and track
the signals when a crossover occurs.
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This is the simplest position trading strategy
because moving average crossovers on higher
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timeframes work better than short-term crossovers.
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This is likely because they produce fewer
false signals.
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However, be careful with moving average crossovers,
because this strategy works only in trending
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markets.
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When the market is in a range, youâll probably
see something similar on your charts.
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Despite the fact that position trading is
a long-term strategy and takes some time to
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profit from markets, itâs a safer alternative
compared to the other strategies in the market.
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Used it in conjunction with the long-term
trend and with a proper money management system,
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the position trading might bring back the
enjoyment of trading, without having to spend
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all day in front of the computer.
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Until next time.
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