In Positional trading you do not square off your position the same day or within a few days.
After you invest, you hold on to your investment for weeks, months, or even years, intending to earn maximum returns.
Positional traders uses the ‘buy and hold’ strategy. For example, they could be result announcements, or a company could be filing for bankruptcy.
Hence, these traders are not impacted by short-term volatility and have a long-term horizon with ample liquidity.
Positional trading strategies
While position trading may appear to be easy, it requires deep fundamental and technical research, as well as a solid grasp of the markets.
Here are a few strategies to help you trade more effectively
Support and Resistance Trading
Support and resistance indicators can assist you in determining if the price of an asset is likely to fall into a downward trend, or grow into an upward trend.
Depending on this evaluation, you may determine whether to start a long position and profit from weekly, monthly, or yearly rising prices or a short position and profit from price reductions that last for a long time.
When trying to ascertain support and resistance levels, the following three major factors must be considered.
The most dependable source of support and resistance levels is historical pricing.
Previous levels of support and resistance serve as indicators of future trends.
Technical indicators that might provide dynamic support and resistance levels that fluctuate in response to the price of a certain asset.
Breakout Trading Strategy
Breakout trading entails attempting to open trade during the early phases of a trend. Typically, a breakout strategy serves as the foundation for trading large-scale market swings.
A breakout trader, like a support and resistance trader, will normally start a long position once the stock price breaks just above the resistance line, or a short position after the stock goes down below the support level.
As a result, to be a great breakout trader, you must be familiar with spotting levels of support and resistance.
50-Day Moving Average Trading
The 50-Day Moving Average Indicator is among the most important indicators in positional trading.
50 is a factor to both 100 and 200, which are moving averages representing important long-term trends.
Whenever the 50-Day Moving Average indication crosses with the 100 and 200-Day Moving Average indicators, it may signify the beginning of a new long-term trend, making it a useful indication for positional traders.
The stop-loss in a trade executed using this approach is set immediately below the most recent swing down.
Pullback and Retracement trading strategy
A pullback is a small drop or retreat in an asset’s current rising trend. Pullback trading allows traders to profit on declines or delays in the upward trajectory of an asset’s price.
The goal is to purchase undervalued stocks and sell them after the asset has recovered from the setback and resumes its upward trajectory.
Pullbacks are frequently alluded to as retracements, although they are not the same as reversals.
A technical indicator called Fibonacci retracement can help you evaluate whether a market decline is a pullback or a reversal.
Advantages of position trading strategies
1) Positional trading is a long-term strategy that can yield significant gains.
2) The positional trading strategy takes advantage of large stock moves spanning weeks and months.
3) Because positions do not need to be examined daily, the trader is less concerned than with certain short-term techniques.
4) The positional trading strategy simply necessitates time spent analyzing probable stocks, leaving greater time for other transactions or professional duties.
Disadvantages of position trading strategies
As the saying goes, while every activity has advantages, it also has its own set of disadvantages.
Similarly, a position trading strategy has its own set of drawbacks that you should be aware of before engaging in trade
1) As transactions might run for several months, a large amount of cash is required to keep positions open for an extended length of time.
2) Transfer expenses can quickly add up if the position is open for an extended length of time.
3) The positional trading strategy also necessitates the investor’s capital being locked up for extended periods. It is thus advised that you get your risk profile assessed before venturing into the realm of positional trading.
4) Deposits are required since trading positions with small amounts of money is impossible. As a result, large price changes are more likely to result in a total loss of invested cash.
To identify market movement, positional traders rely heavily on fundamental and technical research.
Positional trading may be a good alternative to trading stocks if done properly with analysis and understanding.
These strategies aren’t simple to implement, especially for novice investors, but if you’re just getting started with positional trading, these positional trading strategies help you feel more confident in your decisions.
Positional trading can be a great alternative to day trading if you trade with accurate knowledge and research.
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