Positional trading is a longer-term strategy where you take a position in an asset and hold it for an extended period. Positional trading often takes place over weeks or even months.
This type of trading is based on the premise that the markets are cyclical and that prices will eventually revert to their mean or average price level. As such, positional traders often seek to buy assets when they are undervalued and sell them when they are overvalued.
One of the key advantages of positional trading is that it allows you to take advantage of larger market movements. For example, if you believe that the overall market trend is bullish, you may want to take a long position in an asset. Similarly, if you believe that the overall trend is bearish, you may want to take a short position.
Another advantage of position trading strategies is that they help you manage risk better. This is because you are not trying to pick tops and bottoms in the market but are looking to take a position and hold it for an extended period. As such, if the market does move against you, then your losses will be limited.
There are a few things that you need to keep in mind when trading positional. First, you need to have a clear idea of the overall trend in the market. Second, you must identify key support and resistance levels where you believe prices will reverse. Finally, you must plan how to exit your position.
Positional Trading Strategies
1. The Three-Day High/Low Breakout Strategy.
The three-day high/low breakout strategy is a simple and effective way to trade market breakouts. The strategy looks for instances where the market has made a three-day high or low and then enters a trade in the breakout direction.
2. The Fibonacci Retracement Strategy.
The Fibonacci retracement strategy is a popular trading strategy that uses Fibonacci levels to identify potential support and resistance levels. The strategy looks for instances where the market has retraced to a Fibonacci level and then enters a trade in the direction of the original move.
3. The Support and Resistance Strategy.
The support and resistance strategy is a simple but effective trading strategy that uses support and resistance levels to identify potential trading opportunities. The strategy looks for instances where the market has reached a support or resistance level and then enters a trade in the direction of the original move.
4. The Trend Following Strategy.
The trend-following strategy is a simple but effective way to trade trends. The strategy looks for instances where the market is trending and then enters a trade in the direction of the trend.
5. The Momentum Strategy.
The momentum strategy is a simple but effective way to trade market momentum. The strategy looks for instances where the market is moving with strong momentum and then enters a trade in the direction of the momentum.
6. The Candlestick Reversal Strategy.
The candlestick reversal strategy is a simple but effective way to trade candlestick reversals. The strategy looks for instances where the market has reversed course after a bullish or bearish candlestick pattern and then enters a trade in the opposite direction.
7. The Price Action Strategy.
The price action strategy is a simple but effective way to trade market price action. The strategy looks for instances where the market has moved in a certain direction and then enters a trade in the same direction.
8. The Elliot Wave Strategy.
The Elliot Wave strategy is a complex but effective way to trade market cycles. The strategy looks for instances where the market has moved in a certain direction and then enters a trade in the same direction.
9. The Pivot Point Strategy.
The pivot point strategy is a simple but effective way to trade market breakouts. The strategy looks for instances where the market has made a breakout from a pivot point level and then enters a trade in the breakout direction.
10. The Harmonic Pattern Strategy.
The harmonic pattern strategy is a complex but effective way to trade market cycles. The strategy looks for instances where the market has moved in a certain direction and then enters a trade in the same direction.
These are just a few different trading strategies you can use to trade the markets. As you become more familiar with the markets, you will likely develop your unique trading strategy. The key is to find a trading strategy that works for you.
Cons of Positional Trading
- Positional trading generally requires a larger initial investment than other trading styles, such as day trading or swing trading.
- Positional traders may need to wait longer for their trade setups to develop, leading to increased anxiety and frustration.
- There is a greater risk of slippage (price movement against your position) when entering and exiting trades due to the large size of most positional trades.
- The increased capital required for positional trading can make generating consistent profits more difficult as relatively small market changes can greatly impact your account balance.
Pros of Positional Trading
- Positional trading generally results in fewer trades than other types of trading, so there is less opportunity for trader error.
- Positional trading can take advantage of “large moves” in the market, leading to greater profits.
- Because positions are held longer, fundamental and technical analysis can be used to make better-informed decisions.
- There is less pressure in positional trading, as trades are not made daily. This can lead to improved decision-making and reduced stress levels.
- Positional traders often have more information about the market than day traders or swing traders, who can observe trends over longer periods.
- Positional trading can take advantage of “market cycles,” which tend to repeat themselves over time.
- Traders can “ride out” periods of volatility and uncertainty by taking a position in the market.
- Positional trading generally requires less capital than other types of trading, as positions are held for longer periods.
- The risks involved in positional trading are often more predictable than those associated with other types of trading.
- By staying in one position for a prolonged period, traders can reduce transaction costs.
Positional trading can effectively trade the markets, but it is not without risks. Before entering any position, consider all the pros and cons carefully. In addition, be sure to consult with a financial advisor to ensure that positional trading is right for you.
