Position or End of Day Trading is done on the daily charts. Now, if you are a new trader, you should start with position trading or long term trading especially if you have a day job and can’t give much time to trading. As a position trader, you will enter your trades at the end of the trading day at 5 PM EST. It is a common practice to take 5 PM EST as the end of the trading day on the daily charts even though the currency market is active around the clock from Sunday 5 PM EST to Friday 5 PM EST. So as a position trader, you get enough time to analyze the market and determine whether the market is trending or counter trending on the daily charts and confirm this by looking at the weekly and the monthly charts.
You enter into a trade and base your stop loss on the percentage of the account as well as the support and resistance. As a position trader, once you enter into a trade, you don’t have to check back in again until before 5 PM EST, the next day. As a position trader, you don’t have to worry much about the fundamental news releases. The stop loss is there to protect you from any unforeseen event that can change the higher timeframe trends.
So as a position trader, you don’t have to spend eight hours sitting infront of the computer screen monitoring the market. You just need to check in only once a day. Another benefit of position trading is that since you are trading on the higher timeframes, you will catch larger price moves. But the disadvantage is that your losses will be larger as compared to trading on the smaller timeframes.
So, if you are a beginner position trader start by trading only one contract per trade. Keep your stop loss far enough away from the price so that you don’t get hit when there is a large intra day price swing in the market caused by the release of some fundamental news and other day to day happenings in the financial markets. Place the stop loss just above the last swing high or below the last swing low.
This is something very important. Your risk will be the number of pips between where you entered into a trade to where you placed the stop loss. If you don’t feel comfortable with losing that much pips, you should not enter into a trade. As always, first practice your position trading system on your demo account for at least two month before taking the plunge with live trading.