Home Tips & Tricks Balancing Your Portfolio as a Position Trader

Balancing Your Portfolio as a Position Trader

Balancing Your Portfolio as a Position Trader

Trading financial markets come with lots of unseen risks that can destroy a trader’s morale. Therefore experienced traders and banks advise investors to trade with caution using proper risk management and strategy. One of the noted tips is to distribute your initial equity into several different portions, in other words spreading your eggs in various baskets. 

The methodology behind diversifying your portfolio is the same for multiple participants but differs in the types of instruments one is investing in. Our article will cover various assets that position traders can exploit to satisfy their trading approach.

Benefits and demerits of position trading

Position trading involves holding a certain instrument for several months or a year. It is very different from scalping or day trading, which involves rapid buy or sell transactions. The enormous benefits of position traders are listed below:

  • Time consumption. You don’t have to be glued to your trading screen 24/7. Monitoring your assets once a week or a month is enough in most cases, as the expected ROI comes in after waiting for a long time.
  • Market fluctuations. Position traders are immune to the short-term market fluctuation due to particular news events or technical patterns. Trading on the more extensive time frames eliminates all the unnecessary noise. 
  • Stress. These traders’ psychology is always on the better end as they are less exposed to their trading screen and volatility.  
  • Safety. Position trading is generally considered a safer option. Balancing your portfolio also helps in distributing risks. Such type of investment does not require a trader to win every bet. A few big wins can coup up to cover 2-3 losses. Warren Buffet, a noted billionaire and investor, follows a similar strategy and focuses on building his equity slowly.

A few downsides to position trading are:

  • Growth. As the amount of risk is proportional to reward, your equity’s overall growth will be slow.
  • Deposit. You need a good amount of cash to earn a sustainable income.

Tips for position trading

The following tips can help you diversify your portfolio and maximize the benefits of position trading:

  • Indicators such as moving averages, relative strength index can help in making the decisions.
  • Invest in different currencies to diversify your portfolio. However, beware of the currency correlation. You can also choose to invest via various exchanges.
  • Using both fundamentals and technicals may increase the winning probability. Traders who already have consistency do not need to tweak their settings.
  • Focus on trading with brokers that charge the minimum overnight fees. Spreads are also a concern here, but rollover charges are the priority.
  • Allocating a fixed amount of percentage capital on a single pair can be beneficial.

Examples of few available instruments

Let’s shed some light on a few currencies a trader can hold to build up his position trading portfolio with ease.


One of the widely traded currencies of the world offers traders tons of prebuilt strategies that they can easily implement. For a standard lot, each pip is worth $10. Traders can also jump to and forth from one asset to another, depending on which one provides better interest rates.

Breakout strategies are quite famous for this pair as it often enters a consolidation period. After trading within a range for some time, the price will break out of the potential support and resistance, which usually leads to a good trend. Ride the rally to your advantage for a possible swing trade.

As we are looking for swing trades staying on a higher time frame is a better option. On the daily chart at EUR/USD, the price breaks the support and shifts itself to a downtrend.

Image 1. As we are looking for swing trades staying on a higher time frame is a better option. On the daily chart at EUR/USD, the price breaks the support and shifts itself to a downtrend.


Like the eurodollar, USD/JPY has a good amount of liquidity and volatility for position traders. A good amount of fundamental and technical analysis is available on the pair via various financial websites, which new or amateur traders can pick up. 

The important economic events include interest rate differentials, central bank policy, commodity correlations, and general economic conditions.

The differences in interest rates are not that significant, with the Japanese government offering -0.1% and the Fed maintaining 0.25%. Therefore, the better approach can be the application of a swing trading strategy with proper risk management.

Turkish Lira

The Turkish Lira has gone through an extensive period of devaluation against the united states dollar. Turkish economy counters the rising inflation by increasing their interest rates which currently hangs at a value of 19%. 

For investment purposes, it is relatively easy to open a bank account and deposit your cash. Moreover, given the uncertainty in the pair, a trader can hedge out the position through position trading in case the Lira falls further.


The price action patterns on the weekly chart at GBP/AUD provide suitable conditions for technical traders. It is also one of the most volatile pairs so that market participants can get many pips from their trades. Using multiple time frame analysis is beneficial.

The bottom line

Diversifying your portfolio over noted assets can provide you with an excellent passive income over several years. It is completely opposed to the get-rich-quick scheme, which attracts all novices and never seems to work. You can only hope for success if you use proper risk setup and have a game plan.


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