Position trading is the longest-term trading method in forex. You take a long position when you expect a currency to rise in value. Also, a short position when you predict it will fall. This way, you lock in your profit at a fixed point and price.
The most important aspect of position trading is that you are patient. This means ignoring short-term price movements. For more specifics about position trading in forex, read on.
The Fundamentals
To understand position trading, you need to have a good knowledge of the forex market and anticipate how the economy will change in a few years. You are buying forex (short for “foreign exchange”) and looking ahead fixed point in the future when you predict that you’ll make a positive return. The fundamentals that you need to learn first are how economic data affect the currency you trade, and what the future may hold. Fundamental trading is when a trader will focus on specific events in the economy to determine which stock they should buy, and at which point.
By examining economic and financial factors, you use fundamental analysis to study the micro and macroeconomy. This includes understanding a company’s stocks, revenues, equity, and possible future growth.
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A Trade of Currency Pairs
The currency pair is a price that will be quoted to you on a trading platform at the rate of two separate currencies. Currency pairs have two sides and are displayed as EUR/GBP or the other way around. The currency on the left is the base one that you will buy and sell at. The right-hand side is the quote currency and sets the price of the base currency.
To trade currency pairs you choose two currencies to buy and sell with. Each currency will experience different market fluctuations based on the global economy. To understand which ones to use, you’ll need to learn about the various currencies and how they are affected by social and political events. There will be patterns and features you can use to predict future forex prices.
Technical Analysis
Where fundamental analysis looks at the economic and financial status of a company, technical analysis refers to following trends. By looking out for price patterns in the market, you identify trading opportunities and historical trends of different stocks. It requires studying price and volume and scrutinising supply and demand to determine how price is affected.
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Technical analysis should be used in conjunction with fundamental analysis when position trading to give you the broadest overview of your investment. You will look at the financial viability of the company as well as how economic trends affect forex stocks.
A long position will yield a profit when you accurately predict a currency to increase, whereas a short position expects the currency to decrease. If you predict correctly, either way, you make a profit.
Once you understand these major points, you determine your position trade in the forex market based on your prediction. The type of position you choose to take will depend on the asset you are trading with, how the currency pairs perform in the market, and how long you want to trade for.
