The two words that explain positional trading are ‘wait and watch’. This is self-explanatory as a positional trader just have to wait to watch the movement of their trades patiently. That’s all about positional trading? No, like any other stock market, positional trading has its own challenges. It is not as risky as margin trading or intraday trading.
Let’s understand and learn positional trading basics.
Defining Positional Trading
Positional trading is short-term trading where traders enter the market and hold on to a position until they believe it has reached a situation of a trend reversal. A trend reversal is a point with the stock price falls. The frame of time for a positional trade indefinite. Unlike Intraday trading or BTST, the position trader can hold the stocks for few minutes to few years.
However, it cannot be referred to as a long-term investment as the trader never determine the time frame before investing. The time periods for waiting can be sometimes long. It is an attempt to take most of the stock upward trend. Henceforth, it is also called ‘Trend trading’.
The trend trading is based on simple assumptions of the current trend that move for a long time in the future.
Types Of Position Trades
Positional trading is not as complex as another trading whereas it’s just a simple process of wait-and-sell. The position trade emphases on stock movements at a considerable rate in order to gain position. Subsequently, it becomes critical to determine the stock trends and ascertain the entry and exit points.
1. Finding a trend
It is an approach where trade does extensive research and technical analysis for a potential stock by evaluating trends and chart patterns. During this stage, the stock is at the breakpoint and has not started its upward trend. This, a trader predict when the stock trend will begin to enter the market at the right time.
2. Join the trend
In this type of positional trading, a trader does not consider to predict the start of the trend. Rather, they just invest in a stock with an upward trend to enter. It may sound a bit easy for many while it requires good knowledge and skills to find a right trending stock to enter the market.
Profiting from Position Trading
Positional trading is not suitable for casual investors as it requires in-depth knowledge to study trends. If you think, you’ve mastered the subject, then you should obviously not ignore positional trading, as you make huge profits.
The whole concept of positional trading is to keep the level as low as possible. Just like other forms of investing, the risk level results in the level of profits you can make. The stock market professionals can make large profits as they deal with an enormous amount of investment. The majority of the strategies used in position trading do guarantee a specific amount of profits. However, keeping the level of risk is much more important than making profits. As you trade with huge amount capital, making a little bit of return is also very significant.
To conclude the above discussion, positional trading is the easiest form of trading. While many traders find it challenging as it seems. The few things positional traders keep in mind is to find the right stock, identify trends through analysis, determine the entry and exit point, and last is to keep a regular track on stock price movements.
So, if you’re a working professional and cannot devote your time to learn positional trading then you can take an online positional trading course at your convenience from a professional institute for the stock market.