Is position trading profitable?

Nothing on this page shows that it is. The page describes what people do and why. Published research on trading rules is mixed, results that looked good in one period have often faded in the next, and costs remove much of what remains. The loss figures that regulators require firms to publish show that most retail accounts trading CFDs lose money.

How is position trading different from investing?

The line is not sharp. An investor usually owns the asset outright and may hold it indefinitely. A position trader usually has a defined view, an exit, and often a leveraged product such as a CFD, which carries financing costs and can be closed out by a margin call.

Why does swap matter for long-held trades?

It is charged or credited every night. A small daily amount held for two hundred nights is two hundred times that amount, and on a leveraged position it is worked out on the full value of the position, not on the margin.

Position trading: holding for weeks, months or longer

On an invented price path, the price rises over a long stretch with two deep falls on the way, with one early purchase closed at a loss and a second held through a fall that took back much of what it had gained: 2 trades are marked, one closed ahead and one closed behind.

A triangle marks where a trade opens and points the way it was taken. A green dot is a trade closed ahead, a red dot one closed behind. The path was invented to show how the approach behaves, including where it goes wrong. It is not market data and it proves nothing.

Also searched asposition trading strategy · long-term trading · buy and hold trading · long term forex trading

A description, not a recommendation

This is a description of an approach people use. It is not a recommendation. No approach works in every market, nothing here has been shown to be profitable, and the chart is invented.

The idea

Position trading is the slowest of the active approaches. A trader forms a view about a large move, often from economic reasoning such as the direction of interest rates, growth or supply, takes a position and holds it through the pullbacks along the way. The aim is the bulk of one large move, not its swings. It is defined by its holding time, not by any one signal.

Usually heldWeeks to months, sometimes years · others held about as long

The rule, as people usually state it

There is no standard rule. A typical statement is: decide the direction from the weekly or monthly picture and from the economic case; enter on a daily chart when the price agrees, for example above a long moving average; place the stop far enough away to survive ordinary pullbacks; and review weekly, not daily. The position is closed when the reason for it no longer holds or the stop is reached.

What it needs from a market

A large move that does in fact happen. One view is held for a long time, so one wrong view costs a long time.
A small position, because the stop is far away and the risk must still be a small part of the account.
The ability to sit through a fall that takes back a large part of an open gain.

What it costs

Very few trades, so the spread hardly matters. Overnight financing matters a great deal. A leveraged position is charged or credited swap every night it is held, and over months the total can exceed the spread many times over; on a position held against the interest-rate difference it is a steady charge. Leverage also means a deep pullback can call for more margin long before the view is proved right or wrong.

When it fails

When the view is wrong. There are few trades, so there is little to offset a large mistake.
When the view is right but the pullback on the way is deeper than the account can bear.
When financing charges over a long hold consume the gain.
When the reason for the trade changes and the position is kept out of habit.

The mistakes people make with it

Calling a losing short-term trade a “position trade” in order not to close it.
Using leverage suited to a trade of hours on a trade of months.
Leaving the swap out of the plan.
Watching a monthly idea on a five-minute chart and acting on the noise.

In the rule bench

The rule bench cannot express position trading. Its test is 480 bars long with no financing cost and no economic view to hold, and the choice that defines the approach, the reason for the trade, is not something a rule made of averages can state.

What the rule bench can test

Questions people ask

Is position trading profitable?: Nothing on this page shows that it is. The page describes what people do and why. Published research on trading rules is mixed, results that looked good in one period have often faded in the next, and costs remove much of what remains. The loss figures that regulators require firms to publish show that most retail accounts trading CFDs lose money.
How is position trading different from investing?: The line is not sharp. An investor usually owns the asset outright and may hold it indefinitely. A position trader usually has a defined view, an exit, and often a leveraged product such as a CFD, which carries financing costs and can be closed out by a margin call.
Why does swap matter for long-held trades?: It is charged or credited every night. A small daily amount held for two hundred nights is two hundred times that amount, and on a leveraged position it is worked out on the full value of the position, not on the margin.

The words on this page

An explanation for study. It is not advice, a recommendation or a forecast. This is a description of an approach people use. It is not a recommendation. No approach works in every market, nothing here has been shown to be profitable, and the chart is invented.