What Is Position Trading – An Expert’s Take 2024
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Fundamental analysis plays a crucial difference in the growth of a portfolio. Every company has certain management decisions that determine its long-term growth or decline.
Although day traders aren’t significantly concerned about a company’s management and prospects, position traders pay special heed to the internal management of the company and whether it has the potential to grow.
Are you looking to begin long-term trading? If yes, it is your lucky day; we shall discuss position trading, its effectiveness, and how you can make a profit by position trading strategies.
We have Ezekiel Chew with us to share his take on the subject; he is a renowned mentor who has helped thousands of traders learn investment and succeed in their journey. Let’s use his knowledge to maximize our profits.
What is Position Trading
Day traders use market indicators to predict the movements of assets; however, the importance of technical analysis shrinks for position traders. Position trading can be defined as a long-term trading strategy where short-term falls or rises don’t play a significant role in the traders’ decisions.
A position trader is more inclined to find companies that are trading at a low cost in the current market but have a high potential to succeed once they mature or market conditions improve.
Many famous investors, such as Warren Buffet, primarily rely on position trading for their assets; they tend to wait for a company’s shares to become a bargain before they enter the trade.
It allows them to make profits once the share price rises. A position trader is the opposite of a day trader; while the latter may make twelve trades daily, a position trader doesn’t usually make less than 10-12 trades per year. The main focus is to wait for a bull trend to start and capitalize on it.
Do Position Traders Make Profit?
According to a study, 75% of investors in ASE are sleeping investors, meaning they tend to be inactive in the market for short-term traders and move during trend changes.
Position trading has been a highly popular trading strategy amongst experienced investors; it allows them to maximize their returns without taking additional risks.
The idea is to hop on the trade as a market enters its accumulation phase; during the beginning of the cycle, the share prices are significantly low, which allows the traders to make their move with smart money.
They enter the market when it is trading at a low price and wait for the market to rise to the markup phase and then to the distribution phase, where they exit the trade.
However, the idea can’t often result in long-term success for most position traders looking to make trend-based movements. Any market has mainly sideways movement, and trend changes occur with a long passage.
A position trader has to wait for their trades to result in profits, and if they tend to quit early, the brokerage and opportunity cost is usually high, resulting in an unfavorable move.
Position traders need to rely on both trend and fundamental analysis to make good decisions; while a bullish market is a favorable investment environment, it is no guarantee of significant progress; hence, the profit can only be made by a detailed understanding of a potential asset’s potential and current price.
Is Being a Position Trader Good
Every trading strategy has its fair share of pros and cons; some strategies work great for others while creating terrible results for others. Position trading is suitable for traders who can’t free adequate time to sit in front of their laptops during market hours.
Day Trading is about finding the perfect timing to enter and exit a trade. If you are slightly slow, the results will be dampened.
Usually, investors with fixed jobs fail to provide enough time to their trading portfolio, and they would like a trading strategy that could help them materialize great results without skipping their office hours.
Day or swing trading creates difficulty for them due to its time requirement; thus, the best alternative is a position trading strategy. It will provide them with a significant time delay to understand market movements before they finalize their trades.
Also, some newbies are often bothered by the high pace of the stock and forex markets; they often complain about failing to materialize on good opportunities.
Position trading lets them stop worrying about short-term market fluctuations and study long-term trends. They can wait and analyze the market with utmost precision before carrying out their trades.
The Strategy of Plus and Minus Position Trading
Pros
- Position trading allows traders a relaxed schedule for timing their decisions. Traders can study the market during their free time without worrying about fluctuations during the learning phase. It shall provide you with enough time to spend on your job and family without compromising your research.
- A long-term strategy can help you generate outstanding results; position trading strategies rely on technical and fundamental analysis to time their decisions.
- The traders study market trends and time their movements per smart money. Hence, the trades have a high chance of success, and risks are minimized.
- Position trading eases portfolio management for traders; swing traders struggle to capitalize on a diversified portfolio; it gets challenging to find the right time to trade every asset on the portfolio, and they often miss out on good opportunities.
- Using a position trading strategy, you shall have significant time to spend on other assets and their analysis.
Cons
- Usually, a position trading strategy would require high capital investment; a small investment won’t usually provide feasible returns for the investor and would be prone to fluctuation.
- A sharp decline in short-term value would mean the investment shrinks significantly. Large investments can bear large movements and will provide excellent results when the market rises
- The brokerage fees incurred in position trading are usually higher than in other trading methods. When a trade stays open for an extended period, the brokerage fees keep piling up, and they may take a significant proportion of your investments.
- The longer-term trading strategy is vulnerable to wrong decisions; as the investment is locked for an extended period, the opportunity cost tends to be significantly high.
- If the trader’s insight turns wrong, the losses can be significant, and the large investment could dramatically plummet. Newbies often misinterpret technical indicators, and a false inference could cause massive losses.
The Importance of Support and Resistance
Support and resistance are essential benchmarks for traders; it helps them understand the growth or decline of a share and its limits.
Resistance refers to an upper limit that a share has previously bounced back from; It can be a historic high that an asset has never gone beyond or a price after achieving, which the asset has previously declined.
Supports are the opposite of resistance; they highlight the price levels after which a decline ends, and a rise occurs. It can be historical support levels, where a declining price bounces back.
The parameters are essential for position traders to time their entry and exit from the market. An asset trading declining to its historical support has a high chance of reversal as the trend changes. Hence, it provides an excellent opportunity to invest with less risk.s.
Similarly, if an asset is trading close to its resistance, there are fair chances of a possible decline, and position traders should look to opt-out of it.
Price gate is another crucial concept in understanding resistance parameters; it refers to the highest price a share could achieve beyond which the price won’t go.
Position traders should comprehensively understand an asset’s historical support and resistance levels to time their decisions accurately.
Risks of Position Trading
No trading strategy takes away its risks, and it isn’t fair to expect position trading to be a fool-proof solution for your trading successes. There is substantial evidence of position trading’s efficacy, but some risks are involved.
The biggest risk exists for traders who struggle to keep a liquid position.
Usually, position trading takes a significant time to bring good results; if you have a large capital with no probable requirements, position trading can be a good option.
However, if you would require the investment in about six months, you will be exposed to position trading risks. An asset may have short-term fluctuations, and they are usually unavoidable.
Short-term price movements can put you in an unfavorable position, and if you have an urgency to withdraw the investment, you may have to bear a significant loss. Position trading works well from a long-term perspective.
An asset moves in cycles, and after its downward movement, a rise occurs. If a trader can utilize the time to come up with rising stocks, they can make a profit with the trading strategy.
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Ezekiel Chew is a renowned forex trader, trainer, and industry expert. He has trained professional and retail forex traders as well as corporate finance players like bank traders, money managers, and asset investors. From his trading experience drawn from over 20 years of trading the forex markets, he has created a comprehensive forex trading course known as “the one core program”.
Ezekiel asserts that the one core program is designed for the ‘committed learner’, so previous trading knowledge or experience is not required before you can enroll in the program. The program comprises over 60 video lessons that teach proprietary trading strategies that are backed by mathematical probability and technical analysis principles.
The one core program has been proven to be highly efficient as it has generated millions of US dollars for Ezekiel Chew and his students. There are numerous testimonials from students that have graduated from the program and are now making six-digit figures per trade just by applying the techniques learned from the program. The one core program is available on the Asia Forex Mentor website; which is a forex trading blog that has been existing for over a decade.
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Conclusion: Position Trading
Digital investment has shown great potential for traders; it has shaped the lives of various traders and keeps on doing miracles for many others. A trader’s success in the financial markets depends on their trading styles and strategies.
If a trader thinks of the market as a gamble, there is a fair chance that they would end up with high losses. Traders must know the best trading methods to capitalize on their investments and bring great results.
Position trading utilizes long-term trends to provide portable opportunities for traders. It relies on an asset’s fundamental and technical analysis to predict its future growth and prospects. The information about an asset’s resistance and support level highlights the trading positions for investors, and they can find the best time to settle a deal.
An asset’s price chart is a fundamental display of its growth or decline; position traders must give you the information to predict the long-term trend. Various positional trading indicators can help traders get started with the trading strategy.
They must use the available resources to drive the best results for their portfolio. Education has no alternative; if a trader chooses to bisect the process, they will usually end in an unwanted situation.
Position Trading FAQs
How much do position traders make?
Position traders provide an excellent opportunity for part-time traders to make impressive deals and gain their share of financial success. The right trading strategy can help position traders to make significant profits.
The ultimate success comes down to your initial investment, asset growth, brokerage fees, and time horizon. An established asset usually performs excellently over a long interval, and a significant investment can bring impressive results.
What is a good strategy for position trading?
A trader’s success in position trading relies heavily on their trend analysis skills and ability to detect a share’s support and resistance levels. Position traders should time their entry into an asset when trading near its historical support.
The best possible guess is for the share to rise, which would bring profits for the trader. As soon as the trading asset reaches its resistance, it’s time to exit the trade and look for other options. Breakout trading is a good strategy for position traders.
It can help you capitalize on long-term market movements and enjoy great success in the stock market.
