Position Trading: 3 Expert Tips for Online Traders

3 Expert Tips for Online Traders

After conducting research on position trading strategies, we discovered some expert tips that align with our objectives:

• Position trading is ideally suited to a bull market
• Position trading indicators
• Risks with position trading

Position trading is ideally suited to a bull market

The Investopedia article by Akhilesh Gant delves into the details of position trading, including its definition, and strategies, as well as its pros and cons:

• Position traders buy and hold an investment for the long term, expecting it to appreciate in value. They are less concerned with short-term price fluctuations and news events. Position traders are trend followers and seek to exploit a trend's upwards movement. 

• They use technical and fundamental analysis and macroeconomic factors to select investments. Position trading doesn't require a lot of time, but it ties up money for a prolonged period, potentially causing opportunity costs. The main risk is that minor fluctuations can unexpectedly turn into trend reversals. 

• Position trading is ideally suited to a bull market with a strong trend, but not a bear market or a flat market. Traders must match their trading styles with their personal goals, and each style has its pros and cons.

Position trading indicators

• According to an article on Position Trading published by CMC Markets, some of the popular technical indicators that can be used for position trades on any financial market include the moving average over 50 days and support and resistance levels to make decisions on when to open or close a position on an asset. 

• Support levels may occur both in the short-term and historically, while resistance level refers to a price threshold that a security has historically been unable to overcome. Position traders use long-term resistance to decide when to close a position and historic support levels to buy if they believe a long-term upward trend will begin.

• It is a long-term strategy that can lead to big gains.

• A lot of capital is needed to keep positions opened for a long period of time, as trades can last for several months, meaning that the capital is locked.

• Trading positions with minimal funds is unfeasible.

Risks with Position Trading

The CFI Team of corporatefinanceinstitute.com listed the most common risks associated with position trading as follows:

• Trend reversal: An unexpected trend reversal in asset prices can result in substantial losses for the trader.

• Low liquidity: The capital of position traders is usually locked up for relatively long time periods.

In conclusion, position trading can be a viable strategy for online traders who prefer to hold their positions for longer periods and take advantage of significant price trends. By utilizing technical indicators, identifying long-term trends, and managing risk effectively, traders can potentially reap profits from position trading. However, as with any trading strategy, there are risks involved, and traders must carefully assess their goals and risk tolerance before deciding if position trading is right for them. By following these tips and continually educating themselves on market trends and news, online traders can make informed decisions and potentially achieve success with position trading.