Position trading refers to the style of trading in which trades are taken and held for a considerable period of time, anywhere from several days to several months. The majority of long term investors practice this style of trading because of its many benefits. Position traders usually do not bother themselves about fluctuations, which in most cases tend to be short-lived. Investors using this style of trading study long-term time charts such as weekly and monthly charts to identify potential trade opportunities.
When practicing position trading, you are not entering a position in the market and quitting it at the end of the trading day. Position trading involves entering a position with a longer time perspective. Position traders aim to identify trade opportunities in financial instruments where the technical trends and/or the fundamental analysis of the instrument imply a large movement in price that is about to take place, but that which may take an extended period of time to yield good returns.
Position trading is a flexible style of trading. Traders can effectively engage in it while retaining their day time jobs. Because they mainly use weekly and monthly charts for analysis, they can take as little as a few minutes every day just to check on the progress of their trades. As such, it is regarded as one of the easiest ways of navigating the financial markets, without having to glare at the computer screen all the day long.
Just like in any other style of trading, position trading requires adherence to discipline and keeping to the rules. Importantly, because the “long term” perspective is the backbone of position trading, personality and level of risk tolerance of traders can either work for or against them when practicing this type of trading. In position trading, sometimes a trade can be negative for days or even weeks. However, you should be able to be patient and allow enough time for the decision you made to result in profits. Nonetheless, this does not mean you should stay in a losing trade if you discover that the decision you made will not work according to your initial expectations.
To start position trading in any financial market, you should have an in-depth knowledge and understanding concerning the macro-economics and associated issues. Actually, keeping an eye on a long term position can be easy; however, identifying a profitable long term opportunity can be something different.
