Chat with us, powered by LiveChat

How To Be A Position Trader

By May 19, 2020 how to

If you have a mindset of an investor; if you can focus and be motivated by a long-term perspective, and if you don’t act on a whim – congratulations! – you could be the next Warren Buffet! You have the ability to ignore market fluctuations until the time is right. You have what it takes to be a Position trader. Question is, how do you actually become a Position trader?

First off, you need to make sure the Position trading style is right for you. In our previous article, titled How To Find Your Trading Style, we provided a very straight-forward description of every widely accepted trading style, with a list of resources where you can test your trader aptitude. 

Let’s do a quick recap of how to be a Position trader. To be a Position trader means that you’d need to spend most of your time looking into companies’ official data and reports in order to estimate their potential for financial health, stability and future growth. You must also possess the mentality of a chess player rather than an opportunist.  

Position trading is under the same umbrella of Multi Day trading as Swing trading, however, there are some very distinct differences between the two. 

Position Trading vs Investing

This one is easy. Position trading is, in fact, Investing. Since Investing implies buying and holding long-term, both Position and Swing trading techniques are just variations of a more omnibus notion, such as Investment. People outside the industry don’t differentiate between the ways Investment can be performed and simply apply the latter to anything long-term.

Position Trading vs Swing Trading

The main difference between Position trading and Swing trading is the holding time. While both are positioned under the Investment umbrella, the perspective of Swing trading can be defined as mid-term, as opposed to the long-term equivalent of Position trading, as we have mentioned earlier. Swift trading is susceptible to overnight risk, and the holding time doesn’t usually exceed a couple of weeks at most. Swing traders are more involved in the process of technical analysis and daily market monitoring. 

The Basics Of Position Trading

In order to do a professional job as a Position trader, you’ll have to be very versed on the fundamental analysis department for the most, and have a good grasp of technical analysis, too. Fundamental analysis allows Position traders to make insightful predictions towards the assets that would deliver the preferred financial outcome. Technical analysis is used predominantly to help locate the right entry and exit points.  

Some novice traders believe that the choice of a trading platform isn’t important and sign up with whatever broker they find first on Google. While it is true though that the number of forex brokers today is colossal, the technical ability and diversity of platforms are very different. 

If you are determined to do your finest at becoming a successful Position trader, choosing the best desktop trading platform should be your priority. 

TraderXlab knows and understands its traders, that is why the traderXlab platform has all the necessary and a multitude of complementary tools, designed with every individual trading style in mind. Thus, Position traders can enjoy an arsenal of high-end analytical tools, namely the 200-day Moving Average, oscillating indicators like Moving Average Convergence Divergence (MACD), the Relative Strength Index (RSI) and more.

Position Trading Strategies

Trading strategies is an entire topic of its own, but nevertheless we think it is important to go through them briefly here in order to understand how and under what conditions certain trading strategies are irreplaceable in Position trading.

Support and Resistance In Position Trading

Wouldn’t it be great if there was a mechanism that would prompt you when there is a high probability for the price of an asset to fall into a downward trend or increase into an upward trend? This mechanism does exist and is readily available on the traderXlab platform. Based on the data, provided by Support and Resistance levels, traders can evaluate whether it is the right time to open or close their position, thus thinning out the probability of a potential negative outcome. Another way to know when to jump in or out of a trend, Position traders can also execute Fibonacci retracement.

Breakout Trading Strategy In Position Trading

If you feel comfortable with the idea of going long or short when necessary, the Breakout strategy may become your favourite. The key to this strategy lies within your ability to identify the early stage of a trend. By opening a position early in the trend, the Breakout strategy will help you take profit on large-scale price movements.

Range Trading Strategy In Position Trading

You may have noticed that Forex markets don’t always have a clear trend direction, and this is where the Range trading strategy works best, as it requires volatility. The primary trader’s task here is to identify overbought and oversold assets. All the trader needs to do next is to buy the oversold assets and sell the overbought ones.

Pullback And Retracement Trading Strategy In Position Trading

Traders know, literally, from their kindergarten years that a way to make profit is to buy something at a low price and then sell it at a high price. Not much has changed since then. The Pullback strategy provides traders with multiple opportunities to benefit from a temporary dip or short-lived reversal in an asset’s predominant upward trend. 

Position Trading Stocks For A Living

The perspective of replacing your day job by Position trading alone is quite unrealistic, as the direct purpose of Position trading is to bear reward in months’ or years’ time. While you may not be able to financially support yourself with this particular trading style on a monthly basis, securing a decent retirement is quite possible.

Pros And Cons of Position Trading

Advantages:

  • a long-term strategy that doesn’t require constant price monitoring.
  • Low stress due to the insignificance of short-term price fluctuations.
  • Less risky than many other trading styles. 

Disadvantages:

  • a larger capital base is required (see Gold Account and beyond).
  • low liquidity issues.
  • positions can bleed after a sudden trend reversal.

Recommended Position Trading Books

If you’re interested to learn more about the benefits of passive investing and Position trading in Forex, you may enjoy some of the best-selling books on trading.  

  1. Trading Basics: Evolution of a Trader by Thomas N. Bulkowski
  2. Position Trading (Third Edition): BUY like a Trader and HOLD like an Investor by Tony Loton
  3. Mastering the Trade, Second Edition: Proven Techniques for Profiting from Intraday and Swing Trading Setups by John F. Carter

Leave a Reply