EXPLAINED: WHAT IS POSITION TRADING?

Position trading is a trading strategy that involves holding a financial instrument for an extended period of time, typically several weeks or months. The goal of position trading is to profit from long-term trends in the market, rather than trying to make a quick profit from short-term price movements.

One of the key advantages of position trading is that it allows traders to take a more relaxed approach to the markets. Because the holding period is longer, there is less need to constantly monitor the price and make frequent trades. This can help to reduce the stress and emotional intensity that is often associated with day trading or scalp trading.

However, position trading also requires a greater level of patience as traders may have to endure periods of uncertainty and volatility while waiting for their positions to reach their full potential. It is important for position traders to have a clear trading plan and to stick to it, even in the face of market fluctuations.

There are several different approaches to position trading, including trend following, range trading, and breakout trading. The approach is very similar to day trading – it is basically moved from smaller time frames to larger time frame and the trading positions is carried over multiple days, weeks or months, however, the price action and trading logic behind remains the same.

Trend following involves identifying a long-term trend in the market and taking a position in the direction of that trend. This can involve buying an asset when it is trending upwards and selling it when it is trending downwards, or vice versa. Trend following can be a profitable strategy in markets that are trending strongly in one direction.

Range trading involves taking positions in an asset when it is trading within a defined range. The goal is to profit from the asset's price fluctuations within the range, rather than trying to predict its overall direction. This can be a good strategy in markets that are choppy or range-bound.

Breakout trading involves taking a position in an asset when it breaks out of a defined range or pattern. The goal is to profit from the momentum that often follows a breakout. Breakout trades can be triggered by a variety of factors, including fundamental news events or technical signals.

Position trading can be a rewarding strategy for traders who are able to identify long-term trends in the market and have the patience and discipline to stick to their trading plan. However, it is important to be aware of the potential risks and to use proper risk management techniques to protect against potential losses.