Held for weeks or months on end:position trading rides the trend.
A long-term trading style where positions are held for weeks, months, or even years.
Position traders focus on fundamental analysis and long-term trends rather than short-term price fluctuations.
In plain words
Position trading is a style in which trades are held for weeks, months or longer, with the aim of following a large, slow move. Decisions rest mainly on long-term trends and on economic fundamentals such as interest rates and growth, and day-to-day swings are tolerated.
See it move
Position trading: the largest here
Why it matters
The long holding period changes which costs matter: the spread is paid once and is small relative to the move sought, while swap, the overnight financing amount, is charged or credited every night and accumulates. Stops are usually set far from the entry, so trade sizes have to be smaller for the same amount at risk.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
A position trader holds one standard lot for 60 nights; in this example the swap is a charge of 4 US dollars a night and the spread on entry was 2 pips.
- 1Spread cost2 × 10 = 20 US dollars, paid once
- 2Swap cost60 × 4 = 240 US dollars
- 3Total20 + 240 = 260 US dollars, which is 260 ÷ 10 = 26 pips
Over the 60 nights the overnight charge is twelve times the spread, and the price must move 26 pips in the trader’s favour to cover the costs.
A common mistake
Holding for longer is not the same as taking less risk. A position held for months is exposed to every event in that time, including weekend gaps, and a distant stop on too large a size can lose a great deal.
Check yourself
Educational information, not investment advice or a recommendation to trade.