A position trading strategy aims to catch one large move in a market and hold it for weeks or months, checking the chart once a week rather than once an hour. The edge, if there is one, comes from patience and sizing, not from clever entries. Below: how we plan, size, fund and review long trades.
Quick answer: what is a position trading strategy?
Position trading means taking a trade in the direction of the weekly and daily trend and holding it for weeks or months. The stop sits beyond a major swing, so it is wide; the position size is therefore small. You review once a week, count the holding costs and exit when the higher-timeframe structure breaks.
What position trading is, and what it is not
Position trading sits at the slow end of the trading styles. If you are still choosing between them, our comparison of scalping, day, swing and position trading styles lays out the time each one needs. Here we assume you have chosen the long holding period and want to know how to run it.
It is not investing with a stop bolted on: the trade has a defined exit and a fixed amount at risk, and it closes when its reason fails.
Most position trades are trend trades on a bigger chart, so the entry rules in our trend following strategy guide apply unchanged. What changes is everything around the entry.
Position trading vs swing trading: what changes when you hold longer
Swing trading holds for days to a few weeks and works from the daily chart; we cover it in our UK guide to swing trading for beginners. Stretch the hold to months and several things shift.
| Factor | Swing trading | Position trading |
|---|---|---|
| Typical hold | Days to a few weeks | Weeks to months |
| Main chart | Daily, 4-hour for entry | Weekly, daily for entry |
| Stop distance | Moderate | Wide, beyond a weekly swing |
| Position size | Moderate | Small |
| Holding costs | Minor on most trades | Can rival the amount at risk |
| Chart time | Daily check | Weekly review |
The hardest change is emotional: a position trade sits through pullbacks that would stop out several swing trades.
Building a position trading strategy, step by step
We plan every long-term trade in the same order, in writing, before the order goes in.
- Weekly direction: read the weekly chart first. Is there a clear sequence of higher highs and higher lows, or lower ones? Our article on top-down multiple timeframe analysis shows how to line the weekly and daily charts up.
- Weekly level: mark the major support or resistance the trade leans on. Our guide to which key levels count and how to rank them helps sort the strong ones from noise.
- Daily entry: drop to the daily chart and wait for price to pull back towards that level and close back in the trend’s direction.
- Invalidation: place the stop beyond the last weekly swing. If price breaks it, the long-term picture has changed.
- Size from the stop: work out the position size so that a hit stop loses only your fixed risk amount.
- Cost check: estimate the holding cost for the time you expect to be in the trade.
- Exit rule: decide now what closes the trade: a weekly close beyond the trailing swing, or a level reached.
Wide stops, small size
Beginners often assume a long-term trade needs a big position. The reverse is true. Because the stop sits beyond a weekly swing, it is several times further away than a swing trader’s, so the stake per point must be several times smaller for the same money at risk.
The risk itself does not change with the style. We use the same fixed fraction of the account explained in how much to risk per trade, and work the stake out with the method in our guide on how to calculate position size for forex, CFDs and spread bets.
Spread bets and CFDs are leveraged, so a small deposit controls a large exposure and losses can exceed what you expected if price gaps through the stop. Months in a trade mean more weekends and news events for a gap.
The cost of holding a trade for months
Leveraged positions held overnight usually carry a funding charge, because you are in effect borrowing to hold the full exposure. Over three or four months it adds up, winning or losing.
The US regulator’s investor bulletin on margin makes the same point plainly: interest on borrowed money directly reduces your return and raises the amount a position must earn to break even. Our explainer on margin and leverage for beginners covers how that borrowing works on UK products.
Funding rates vary by provider, market and direction, so check them before you plan the trade.
Worked example: one hypothetical position trade
All figures here are hypothetical. On a £10,000 account we risk 1% per trade, which is £100. The weekly chart of a currency pair shows higher highs and higher lows, and price has pulled back to a weekly support zone near 1.2500.
- Entry: a daily candle closes back up at 1.2550 after testing the zone.
- Stop: below the last weekly swing low at 1.2250, which is 300 pips away.
- Size: £100 divided by 300 pips is about £0.33 per pip on a spread bet.
- Holding cost: suppose funding works out at £0.60 a day. Over 90 days that is £54, more than half the planned risk.
- Exit: after 12 weeks a weekly candle closes below the trailing swing at 1.3100, and the trade closes 550 pips higher, about £181 before funding and roughly £127 after it.
The trade worked, yet funding took nearly a third of the gain. A sideways drift into the stop would have cost £100 plus funding.
Managing the trade: a weekly review routine
Most of position trading is doing nothing. We review open trades once a week, after the weekly close, and ask:
- Has the weekly structure held, or has a swing broken?
- Has a new higher low formed that lets the stop move up? Our trailing stop loss strategy for price action traders explains swing-based trailing.
- What has the trade cost in funding so far?
- Is a major scheduled event coming that could cause a gap?
Some position traders add to a winning trade once the stop on the first part has moved to breakeven. If you do, size each addition so that the total open risk never exceeds your original amount.
Common mistakes with position trading
- Checking the chart hourly. Noise tempts you to close a weekly trade early.
- Sizing as if it were a swing trade. A wide stop with a normal stake means a much larger loss.
- Ignoring funding. A slow trade can be a losing trade once months of charges are counted.
- Moving the stop further away. If the weekly swing breaks, the reason for the trade has gone.
- Treating a loser as an investment. Holding past the stop because “it will come back” is how small losses become large ones.
Frequently asked questions
How long do position traders hold trades?
Usually several weeks to several months. The chart structure and the plan decide the exit, not the calendar.
Is position trading good for beginners with a full-time job?
It fits a busy week well, because the analysis happens once a week. The difficulty is patience: sitting through pullbacks and slow periods without changing the plan.
Do position traders need fundamental analysis?
Many watch the broad backdrop, such as interest rates. We still let the weekly chart decide entries and exits, since the backdrop gives no stop level.
Is position trading the same as investing?
No. An investor may hold through a large fall, while a position trader has a stop and a fixed risk. Leveraged position trades also carry funding costs that a cash investor does not pay.
Next steps
Write your long-term rules into a plan with our guide on how to create a trading plan with a fill-in template. Building a rules-based risk model and discovering the beginning of new trends are both part of our price action trading course, and the basics section is free to start.
This article is for education only and is not financial advice. Trading leveraged products such as CFDs and spread bets carries a high risk of losing money.
