Position trading
Holding trades for weeks, months or longer to follow a major trend. Fewer decisions and wider stops, with overnight costs that build up over time.
What position trading is.
The longest-term trading style, measured in weeks, months or longer.
A position trader holds a trade for weeks, months or sometimes longer. The aim is to follow a major trend, not the smaller swings inside it.
Position traders often combine the bigger picture, such as interest rates and economic growth, with long-term charts. They accept large swings against them along the way.
With CFDs, holding a position for months has a cost. Swap is charged or paid for every night it is open, so it belongs in the plan from the start.
How position traders work.
Fewer trades, each planned with more care and held with more patience.
Form a long-term view.
Look at what drives the market over months, such as the gap between two countries’ interest rates, or the economic cycle.
Confirm it on the chart.
Check the weekly chart. Some position traders want price above a long-term average, such as the 200-day, before they buy.
Set a wide stop.
Place the stop where the long-term view would be wrong. On a weekly chart, that can be hundreds of pips away.
Keep the size small.
A wide stop means a small position for the same amount at risk. It also keeps the margin in use low.
Review on a schedule.
Check the trade weekly, not hourly. Close it when the trend breaks or the reason for it changes.
The cost of time.
Suppose you buy 0.1 lots of EUR/USD, worth $1 a pip in a US dollar account, and hold it for 180 days.
Your stop is 400 pips away, so the most you plan to lose is $400. Now suppose the swap on this position is −$1.20 a night.
| 0.1 lots, held for 180 days | |
|---|---|
| Stop-loss distance | 400 pips |
| Value per pip | $1 |
| Loss if the stop is hit | 400 × $1 = $400 |
| Swap, at −$1.20 a night | 180 × −$1.20 = −$216 |
| Spread, if it were 0.8 pips | 0.8 × $1 = $0.80, paid once |
In this example, six months of swap costs more than half the amount you planned to risk. The spread, paid once, is small by comparison.
The swap rate here is made up for the example. Real rates follow interest rates and the broker’s charges, and they can change while you hold the trade.
Swap can also be positive, when the currency you hold pays a higher interest rate than the one you sold. It can be negative on both sides, too.
What position traders watch.
The long-term picture, more than the day-to-day moves.
Long-term moving averages.
The 50-day and 200-day averages are widely watched. Price holding above a rising 200-day average describes a long-term uptrend.
Weekly highs and lows.
A position trader’s support and resistance come from the weekly and monthly charts, not the hourly.
Interest rates.
Central bank decisions can move currencies for months. They also change the swap rates on open positions.
Economic data.
Growth, inflation and jobs figures shape the long-term view on indices, currencies and commodities.
Common mistakes.
Where traders new to position trading most often go wrong.
Leaving swap out of the plan. Over months, it can turn a small gain into a loss.
Using too much leverage. A trade held for months needs room for normal swings, and margin to match.
Watching the trade too closely. Daily noise can push you out of a trade planned for months.
Holding on after the reason has gone. A long-term view still needs a point where you accept it was wrong.
Position trading on MetaTrader 5.
The long-term charts and cost details are all in MT5. Some steps below are on the desktop app.
Use weekly and monthly charts.
Switch to W1 or MN from the toolbar to see the long-term trend.
Add a 200-period moving average.
Go to Insert, then Indicators, then Trend, then Moving Average, and set the period to 200.
Check swap and margin.
In Market Watch, right-click the instrument and choose Specification to see its swap rates and margin details.
Track the cost as you go.
The Trade tab in the Toolbox shows the swap charged so far on each open position.
Questions, answered.
What traders ask most about position trading.
01How is position trading different from investing?
02Do position traders use stop-losses?
03Can swap ever be positive?
04Which markets suit position trading?
05Can I practise position trading first?
Practise it on a demo.
Hold a long-term position on a free MT5 demo and watch the swap and the swings before you trade with real money.
Trading CFDs on a live account puts your capital at risk and you can lose money. A demo does not.