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Post of the Day: Trading Styles
Tuesday, 21 April 2009 04:40:12 GMT  |  Richard Krivo, Power Course Instructor
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Student’s Question:

I prefer to be a swing/position trader holding to positions over weeks and even months. I read an example once of Warren Buffet. He was criticized for holding a long EUR/USD position (years!!) and had suffered some losses along the way but on the whole he still made tons.

My question is what is a reasonable strategy for a position trader apart from the obvious?
The obvious: 1. fundamental analysis to determine upward or downward trend.
-GPD growth, long term market economy etc
2. Long time-frame technical analysis, trade only on trends.
-Monthly & weekly charts?
3. Enough margin/capital to cover short-medium term volatility
-using 6 month ATR to determine margin and leverage.
Does the above plan make sense?

Power Course Instructor’s Response:

Yes...all of what you mention would come into play...nice breakdown.

A key will be looking for a "fresh move" back in the direction of the trend on a longer term...Daily/Weekly/Monthly chart. For example, a longer term trader could use the Weekly chart for trend determination, and then a Daily and/or 4 hour chart for timing an entry.

Another thought would be to consider the carry trade (going long the higher yielding currency in the pair) so that interest would be earned on the position on a daily basis.

You may find the grid below interesting as it alludes to three of the more prevalent styles of trading along with their positives and negatives.

chart 4 20 09

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