A position trade stays open for weeks or months, long enough for a move on the weekly chart to play out. The stop has to sit outside the normal swings of that chart, so it is wide, and the position has to be small to keep the risk the same. Because the trade spends so many nights open, holding costs and weekend gaps belong in the plan from the start.
What you will learn
- How a position trade differs from a swing trade in timeframe, stop distance and trade count
- How to size a trade with a 200-pip stop so it still risks 1% or less
- How to count holding costs and weekend gaps in R
- What equity-based limits and minimum trading days mean for a trade that stays open for weeks
How position trades differ from swing trades
A swing trade lasts from two days to a couple of weeks and is planned on the four-hour and daily charts, as the swing trading lesson showed. A position trade takes its direction from the weekly chart and its entry from the daily chart, and it runs for several weeks or months. A position trader might open one to three new trades a month.
The reasons for the trade are slower as well. Most rest on something that takes weeks to unfold: a weekly uptrend making higher lows (see the trends and trendlines lesson), the break of a range that held for months, or the difference between two currencies' interest rates. A common routine is to look at the chart once a day, after the daily close, and to move a stop only on a weekly close.
Wide stops need small positions
EUR/USD is in a weekly uptrend and its last weekly swing low is 1.0620. You buy on the daily chart at 1.0800 and put the stop 20 pips below that low, at 1.0600. That is a 200-pip stop. Your target is the next weekly resistance at 1.1400, 600 pips away.
On a $10,000 Classic account at 1% risk, 1R is $100.
- Risk per pip: $100 ÷ 200 pips = $0.50 a pip.
- One standard lot of EUR/USD moves $10 a pip, so the size is 0.05 lots.
- At the target, 600 pips × $0.50 is $300, or 3R.
A swing trader with a 50-pip stop could trade 0.20 lots for the same $100. The position trader holds a quarter of that size and needs price to travel four times as far to make the same dollars. Run your own numbers through the position size calculator.
The position is small in value too. 0.05 lots is €5,000, worth $5,400 at 1.0800, about half the account balance. Whatever leverage you chose at purchase, the stop and the size decide what you can lose. Higher leverage magnifies both gains and losses.
Count holding costs and weekend gaps in R
Overnight and weekend holding is allowed on CMC Funded, and holding costs apply. Simulated trades carry trading costs, as they would on a live account: a commission when a trade opens and when it closes, a price markup on some symbols, and holding costs on positions kept overnight. The holding rate differs by symbol and by direction, so look it up in the symbol details before you open. On some positions it is a credit rather than a charge, and positions held over the weekend are charged three nights at the Friday rollover.
Then turn it into R. This example uses the sample rate from the spreads and trading costs lesson, $6 per lot per night, which is not a CMC Funded rate. At 0.05 lots that is $0.30 a night. Over 60 nights it comes to $18, which is 0.18R, or 6% of the $300 you hope to make at the target. The swing trade from earlier, at 0.20 lots and held for 5 nights, would pay $6, or 0.06R.
Weekends add a second cost, which the swing trading lesson stress-tested. A stop becomes a market order when it triggers, so if news over the weekend moves the price, Monday's first price can be beyond your stop. Say EUR/USD closes on Friday at 1.0640 and opens on Monday at 1.0560. Your stop at 1.0600 fills near 1.0560, a 240-pip loss of $120, or 1.2R. A trade held for two months passes eight or nine weekends, so assume some losses will be bigger than 1R and keep your risk per trade small enough to absorb them.
Fit a position trade into a challenge
Neither Classic nor Direct has a time limit, which suits a style that trades rarely. The Phase 1 target on a $10,000 Classic account is $800, which is 8R at $100 per R. Three 3R winners and one full loser make exactly that: 9R minus 1R.
Both loss limits are measured on equity, so an open position counts against them for every day it is open. Say you hold long EUR/USD and long GBP/USD, each with $100 at risk. The two pairs often move together, so a strong day for the US dollar can push both towards their stops at once. A $200 fall is 40% of the $500 Classic daily limit and half of the $400 Direct one. Treat positions that move together as one trade when you add up the risk.
The maximum loss floor never moves, and a trade that lasts weeks has many days in which to drift against you. Check each morning that your open loss, plus a gap past the stop, still sits well above the floor. The daily loss and maximum loss lesson shows how to work out that room.
Classic needs at least 3 trading days in each phase, and Direct needs 3. The rules page counts separate days with at least one trade on them, so plan to place trades on at least three different days in each phase.
Check your understanding
You plan a GBP/USD position trade with a 250-pip stop on a $25,000 Direct account, risking 0.5%. What size do you trade?
0.5% of $25,000 is $125. $125 ÷ 250 pips is $0.50 a pip, which is 0.05 lots at $10 a pip per standard lot.
A 0.05-lot trade has been open for 40 nights at the sample rate of $6 per lot per night. What has it cost, in dollars and in R, if 1R is $100?
0.05 × $6 is $0.30 a night, and 40 nights make $12. That is 0.12R.
Why should long EUR/USD and long GBP/USD be counted almost as one trade?
They often move together. A strong US dollar can push both towards their stops on the same day, and both open losses count against the daily limit at once.
Key points
- Position trades take direction from the weekly chart, last weeks or months, and come along only a few times a month.
- A wide stop means a small size: $100 of risk over a 200-pip stop is 0.05 lots of EUR/USD.
- Holding costs grow with every night, so count them in R before you enter.
- Weekend gaps can fill a stop beyond its level, so plan for some losses larger than 1R.
- Open positions count against the equity-based limits, and positions that move together count almost as one.
Next lesson: Follow a trend with breakout entries and trailing stops
All trading is simulated. Rewards are based on performance and are not guaranteed.