What is "Building a Position"

There are still many terms Im not familiar with as I learn and learn.

I often see people talking about building a position.

My understanding is they take a position, lets imagine it is to buy EURUSD at 1.4350 and should it move up x pips, they then move their stop to 0 ? then should it move up some more pips they buy more, in essence using their leverage for a free kick on a larger amount than they would normally risk ?

Is this it ?

What are the pro's and con's and is this very much a longer traders approach....does a position get built (typically) over days ? I would assume you would need a wide set of stops to live within and survuve the swings.

Especially the big guys are building positions. They have too many $ to invest. If they would inject all of that at once into the markets, then we would see crazy volatility. Nobody would want that. That's why they generally build positions over days to weeks.

Now building a position can generally happen in three ways. Let's assume we want to position ourselves in an uptrend.

 

1. We buy when we make more and more profits
2. We buy when the market retraces and we are in losses (averaging in)
3. We buy in a ranging market

Now number 2 is a bad idea generally, cause it makes you get bad habits by averaging losers.
Number 3 doesn't make sense for small guys like us. We can just buy our lots at once in a ranging market.
Number 1, which is also called pyramiding is actually not a bad approach. You can split up your risk and can ride trends for a really long time.
If you go for that approach, you have to have lots of patience until the trend is over. Letting profits ride is essential for that. Which kind of stops you take is up to your testing.

Hope it helps you a bit.

Yeh it does thanks....think I need to build my account before I can let profits run long enough to build and build and build.

Thanks.

see this

http://www.forexfactory.com/showthread.php?t=245149

Good Luck

Hi Jehiel! There are many aspects to the question you are asking: It usually depends on the time frame that the trader uses. For example, if the trader uses a 5 min chart, then it is obvious that he determine whether going in or not within second or minutes, meaning that there is no position-building process. On the other hand, a core trader, who uses daily or weekly charts, can wait for a trigger even a week, since the prices are changed slowly in these time frames. At the end of the day, a professional trader must have a clear method, and see a potential trade even before the pattern is completed.
Hope this is helpful. Good Luck and good trade