Position trading has the longest holding periods of any trading strategy. Although there is more room for profit, there is also more risk. There are numerous well-known instances in history of successful traders who used position trading techniques to make their money.
For instance, Joe Ross discussed what is undoubtedly the longest position trading example in history in one of his most recent newsletters. The trade lasted nearly ten years. The concerned investor began a long-term position in the S&P 500, which he maintained for a considerable amount of time. He set up a trailing stop that would only activate when he believed a substantial profit had been realized, ultimately resulting in the position being closed with a profit of sixteen million dollars.
Another well-known position trader was Philip A. Fisher, who focused on solid companies with really positive statistics. In addition to being a superb investor and having a wide following, which included Warren Buffet, Fisher made tremendous investments. Fisher invested in Motorola shares for a long time and kept them there until his death in 1955 at the age of 96.
Features of a position trader
A sort of trader known for holding investments for an extended length of time is called a position trader. As previously said, roles might be kept for months or even years on average. By definition, position traders are trend followers and are less concerned with short-term changes, unless they have the potential to affect the long-term perspective of their position. In terms of how long they maintain their holdings, long-term buy and hold investors typically outpace position traders, who typically do not trade aggressively.
While making judgments, position traders typically combine technical and fundamental analysis with additional considerations such historical patterns and market movements. Those who are adept at determining the best times to enter and exit a trade as well as when to set a stop-loss order are considered good position traders.
Position trading strategies
The trading approach that most closely resembles conventional investing is position trading. Position traders benefit from long-term price movements; as a result, they are more drawn to markets with distinct patterns and constrained price ranges than to those with high volatility and more expansive trading ranges.
Positional share trading
Frequently, position traders trade stock in companies. Generally speaking, asset classes like equities have more consistent patterns than volatile markets like some currency markets and cryptocurrencies. Position traders can assess a firm’s true value and choose the greatest possibilities for themselves by using fundamental research of the underlying company, even in the face of external events like market announcements or pertinent news. They can bargain based on their predictions for the future positions of certain businesses or even entire industries in a year.
Positional commodity trading
Similar to stocks, the long-term trends in commodities are more closely linked than those in other markets, such cryptocurrency and currency pairs. Not that raw resources aren’t volatile; commodities can be just as erratic as other markets, but they usually level out sooner.
Positional index trading
Large groups of businesses that are grouped together because they all operate in the same region, nation, or continent, or because they are a part of the same supply chain, are included in stock indices. Indexes are therefore favored by position traders and have more consistent patterns.
Position trading in forex
Because of their steady volatility, position traders typically favor less currency pairs. Short-term traders, like day traders and forex scalpers, are big fans of forex trading.
Position traders can benefit from trading breakouts in any financial market since they might offer important details about the start of the next big move in the market. By using this strategy, traders hope to enter the market at the start of a trend.
Positional trading indicators
Technical and fundamental analysis are frequently used by position traders to assess possible market price developments. These are a few popular technical indicator examples that can be applied to position trades on any of the previously listed financial markets.
Moving average over 50 days
One crucial technical indicator in position trading is the 50-day simple moving average. The rationale is that both 100 and 200, which have matching moving averages that are fairly accurate indications of meaningful long-term trends, are factors of 50.
Support and resistance
Position traders can use support and resistance levels to determine if it is better to open or close a position on a specific asset because they show the direction in which the asset’s price is moving. It is possible to have both historical support levels that last for years and short-term support levels. Conversely, a resistance level is the price level that a security has historically seemed difficult to cross. For example, position traders utilize long-term resistance to determine when to exit a position since they expect the security to decline once it reaches this level. Similarly, if position traders think a long-term upward trend is about to start, they may buy at historical support levels.