Positional Trading Strategy : Benefits, Limitations | Share India
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All forms of trading provide the potential for investors to earn. This tutorial will concentrate on position trading, which entails maintaining a position for a long time to increase the likelihood of generating a profit. This article explores what is positional trading and how it functions, provides advice for creating powerful position trader techniques and lists the benefits and drawbacks for a novice or seasoned investor. 

 

Position trading: Position trading is a long-term trading technique that entails owning an asset for weeks or months as opposed to only a few minutes or hours. There is a substitute for short-term trading options in this investment. Position traders might move more quickly even though they often hold their positions for lengthy periods. Position investment, as opposed to buy-and-hold investing, enables investors to take both short- and long-term positions. The perception of position traders being the reverse of day traders is common. Position traders typically do a limited number of transactions annually. 

 

Most people will make between five and fifteen trades in a calendar year as opposed to regularly purchasing and selling. Although buy-and-hold trading and position trading have similarities, buy-and-hold trading is more passive, and positions are kept longer to achieve objectives like constructing a retirement investment portfolio. Because it operates on the premise that a trend will continue gaining momentum for a while after it develops, position trading is sometimes called trend trading. To identify a trend, purchase and wait until it reaches its top before selling.

 

Positional trading strategies: How to Trade 

 

Let's now discuss positional trading strategy you should follow.

 

Fundamental Analysis 

 

Fundamental analysis entails delving deeply into a company's operations. Traders frequently review earnings reports, financial data, CEO remarks, SEC filings, and other documents to do that. Traders may learn about a company's performance, predicted profitability, and future forecasts by looking at its fundamentals. Traders might use fundamental analysis to analyse whether a stock price appears reasonably priced. Position traders can better grasp long-term investors' perspectives and potential buying and selling decisions by being aware of this.

 

Technical Assessment 

 

In order to predict a stock's likely future move, technical analysts examine price and volume behaviour as well as stock chart patterns. If you improve your chart-reading abilities, you will be able to rapidly determine if a stock is in an uptrend or decline by looking at a chart. Also, choose a wise location for your entrance, stop-loss, and more. Chart reading might include searching for really straightforward patterns or more complicated clues. Simple is best. Most of the top traders rely on straightforward and reliable technical analysis.  Technical analysis has been practised for many centuries. Many chart patterns and indicators have also been created over that period.

 

Common Positional Trading Strategies    

 

50 DMA Trading 

 

One of the most crucial indicators for positional trading is the 50-Day Moving Average Indicator. The moving averages of the long-term patterns are indicated by 50,  a factor of both 100 and 200. For positional traders, crossing the 50-Day Moving Average indicator with the 100-Day Moving Average indicator and the 200-Day Moving Average indicator might indicate the start of a new long-term trend.

 

Support And Resistance 

 

Support and resistance levels are important in the stock market since they indicate how a stock's price moves. Positional traders may use this data to judge whether to initiate or terminate a position on that asset.

 

Breakouts 

 

Trading breakouts is one of the positional traders' most well-liked and successful strategies since it heralds the beginning of the next large market swing. Positional traders can use it to help them enter a trade at the beginning of a trend.

 

Reversal and Pullback Technique 

 

A retreat happens when the direction of an equity's present price movement briefly changes. Positional traders use the pullback and reversal strategy to capitalise on these market disruptions. Understand what are stock trading strategies and how to create a winning one with our guide.

 

Advantages of Positional Trading Strategies 

 

Long-term plan/substantial gains:

 

Compared to intraday trading, position trading is a longer-term approach that can provide more significant gains.

 

Less tension 

 

Position trading is far less stressful since it frees up time for other issues by reducing the frequency of position monitoring.

 

Additional time to search for possibilities 

 

Trading from a position gives the trader additional time to hunt for new chances. Finding stocks, currencies, or other assets to invest trading capital in falls under this category. They might search for more possibilities for longer-term earnings rather than always monitoring or modifying holdings.

 

Disadvantages of Positional Trading Strategies             

 

Here are the disadvantages of positional trading.

 

More capital expenditure 

 

As trades that persist for several months will force investors to hold capital in that position, it might cost more money to keep a position open for a lengthy period. Also, if your account is insufficient, traders can lose out on other prospects.

 

Swap charges 

 

A position trader must know whether swap costs consume the potential opportunity since they might accumulate over time.

Lesser reward 

 

The risk associated with longer-term transactions might be lower depending on the trader's position-sizing strategy. This is because being stopped takes significantly longer, and they need to exercise money management. Getting significant gains with proper position sizing may take some time. Alternatively, if traders commit "all in" to a position, they run the danger of losing everything in their account and locking up a sizable sum of money.

 

Final Take

 

Position traders are not required to monitor their positions in the same manner as other trading methods since they are less sensitive to minor price changes. Instead, they sometimes check in on their holdings to look out for important changes. Positional traders anticipate large potential profits from significant market shifts with an emphasis on long-term price fluctuations. Because of this, sometimes deals last for several weeks, months, or even years. Positional traders analyse the markets utilising weekly and monthly price charts, combining technical and fundamental research to identify appropriate entry and exit levels. Positional Trading also becomes easy using Share India's trading software. Also, learn about intraday vs. positional trading with Share India to understand the key differences and choose the trading style that aligns with your investment goals and risk tolerance.

 

Frequently Asked Questions (FAQs)

Position trading is an excellent strategy if you have a 9 to 5 job and cannot keep an eye on the markets all day. The alternative to day trading is position trading, which may be a less demanding method of earning money.

Positional trading is a more sophisticated kind of day trading when a stock market position is kept for an extended time. Position traders want to ride a trend after seeing it in the large picture.

Position trading involves less time to follow the markets and is less irritating and more rewarding. Position trading is appealing because it eliminates most intraday chaos and allows you to concentrate on long-term trends.
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