What is Position Trading?
Position trading is a medium to long-term investment strategy where traders hold positions in financial assets, such as stocks, commodities, or currencies, for extended periods, typically ranging from several months to a few years. The primary goal is to capitalize on long-term trends rather than short-term price fluctuations.
Key Characteristics of Position Trading:
- Long-Term Outlook: Position traders focus on broader market trends and fundamental factors, such as economic indicators, company performance, and geopolitical events, rather than short-term market noise. We primarily choose our companies based on fundamental strength, specifically by looking at their financial statements and focusing on value. We try to buy undervalued companies and hold them until they move higher as markets recognize the opportunity.
- Reduced Trading Frequency: Unlike day traders or swing traders, position traders do not make frequent trades. They enter a position based on long-term market forecasts and hold it until they believe the trend is near its peak.
- Use of Technical and Fundamental Analysis: Position traders often use a combination of technical analysis (such as identifying trend patterns and support/resistance levels) and fundamental analysis (like assessing a company’s financial health) to make informed decisions.
- Easier to Manage: Traders can balance position trading with other commitments since it doesn't require constant monitoring. This especially helps people who work a full time job and can’t monitor markets constantly.
Position trading is suitable for investors who prefer a more hands-off approach and are comfortable with holding investments over long periods to benefit from large-scale market movements.
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