The Luxury of Positional Trading (Part 1)

Have you ever achieved a +1000 pip trade?
How about a +500 pip trade?
Have you done it consistently and consecutively using laser sharp chart reading and pin point precision execution?

One the best kept secrets about trading the Forex is Positional Trading. Why is proficient Positional Trading such a widely kept secret?

  • First of all Positional Trading allows the trader to ride the flow of the market while others are scalping tiny bits and pieces at substantial risk, without clearly understanding one directional market flow.
  • Positional Trading affords the trader the luxury of trading on their own terms, without making impossible demands on their time, stress tolerance level and physiological well being.
  • Another reason is that many educators of Forex trading don’t understand at what point in time the vast majority of directional market flow changes - from long to short or from short to long - on a particular currency pair. Similarly, many mentors don’t understand the precision execution methodology required to make low risk/high reward trade executions.
  • This type of trading is not done in a hit and miss fashion. It is deliberate low risk/high profit target trading, optimizing smart and efficient margin and leverage levels from start to finish.
  • Finally institutional traders who understand all of this simply don’t want you to know. If they told you, how could they continually beat you and take your money? It’s simply not in their best interest for you to know.

What is Positional Trading?

  • Taking a Position and Holding the Position for an extended period of time; days to weeks and in some cases, months.

Why should you be a Positional Trader?

It’s Logical

  • Positional Traders are Professional Traders / Nearly All Professional Traders are Positional Traders
  • If you truly want to be a Professional Forex Trader you must learn Positional Trading – there are No ‘Ifs’, ‘Ands’ or ‘Buts’.
  • Even If you like scalping the Forex market you cannot learn to be a proficient scalpers unless you know how to be a proficient Positional Trader first. Otherwise scalping the Forex is by and large just like playing Russian Roulette - with your time, your health and of course your money!

How do I know this?

  • Throughout my years of teaching I’ve spoken with hundreds, perhaps a thousand or more people who want to be consistent and proficient Forex traders. There’s one common thread in almost every conversation I’ve had – When I ask how their trading is going – their answers are a variation of ‘come see come saw’, ‘not very good’ or ‘downright miserable’.
Then… when I ask them how they trade - not a single one of them mentions the word ‘Positional’; they invariably confess that they are either Day Traders or Scalpers. It’s not surprising that not a single one of them had learned the techniques of positional trading.

  • Shear mathematics and demographics tell a similar story. Ask yourself a question: Given that more than 95% of retail Forex traders aren’t making enough net pips to keep their account balance above the break even point - who would be most likely in that group – the traders who are using 30 pip stop losses to gain 20 pips or the traders who are using 20 pip stop losses to gain 500+ pips? Do the math and draw your own conclusions. The answer is simple common sense.
  • Given that more than 95% of retail Forex traders lose money, what’s missing from the discussion on Forex Education? Isn’t it that there is not enough information available about how to stay out of the 95% loser bracket and how to stay in the 5% winner bracket? - It’s all about Risk Aversion/Risk Management principles and it’s all about making the Forex work for you rather than making yourself a willing slave to the Forex…as so many people do. So many people immediately fall into that seemingly inescapable and insurmountable rut.

Positional Trading may also be known as Turtle Trading – trading as the methodical, purposeful- driven Turtle…as opposed to the quick, unaware-of-the-dangers Hare. The Turtle invariably wins the race while the Hare rarely ever makes it to the finish line!

As an example of what I mean, I’ve provided the following Five Charts and notes: I’ve chosen the AUD/CHF but there are numerous examples of longer term movements like these that are executable with high pip gains in the order of 500 to 1000 pips per week or month that you may be missing out on - without the proper instruction and guidance.

Figure One

An example of Low Stop Loss Execution -15 pips stop loss with a target 1 gain of 100 pips – a 1 to 6.66 risk reward ratio on target one alone. The initial profit take is at a lower 100 pip gain level to ensure at the very least a minimal profit is booked. See the notes on execution and rationale – very important!

Figure 1

Figure Two

With profit booked and remaining lot’s riding with ZERO possibility of loss, the trade is essentially on auto pilot.

Figure 2

Figure Three

Your stop loss is moved up and set just below each consecutive higher low (support) while new higher highs are being established.

The trick to maintaining optimum profit levels is in understanding where to pare down lots and lock in profits at critical Resistance levels – and where to scale in new positions once critical Support levels are established.

Figure 3

Figure Four

As previously stated, the Turtle invariably wins the race while the Hare never makes it to the finish line. You’ve already made and booked hundreds of pips in profit. You can use a portion of your profits as collateral to scale in new positions. In this case you’re buying on dips and taking more profits in tops while the mother lode of your positions are backing you up and continuously making more profit on higher highs. This is why they say ‘Trend is Your Friend’. I think it should be more like Trend is Your Partner, Your Savior and Your Guiding Light. Indeed, Positional Trading can Help You Keep Your Sanity - while all of the scalpers are at their wits end! *To date the pair has gained over 1400 pips from the initial execution level.

Figure 4

Figure Five

Finally, this is what you need to avoid – as a Positional Trader, you don’t have to worry about getting tangled up and frazzled by Intra Day volatility – Instead, you can be enjoying life, go on a family outing, play tennis or take in a game of golf. Meanwhile the market is working for you; you’re relaxed, more well rested, energized, focused and better prepared to make the correct decisions about your next trading opportunity.

- Positional Trading has enormous advantages over every other method of trading. Not understanding positional trading is the #1 Reason why most people who want to be Forex traders – don’t make the cut.

Figure 5

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.