By
David Dombrowsky

Position Trading Strategies and Tips

Published on
March 30, 2023

From a day trader, the other side of the spectrum comprises trading activity that involves looking at the market's long-term, big picture, and overall market landscape. Position traders aren't affected by short-term price fluctuations, emphasizing waiting for trends to emerge instead of rushing to profit from price hikes.

A positional trader is confident that the market will correct itself through volatility, focusing on the long-term performance of an asset. They hold on to a position for extended periods with expectations of price appreciation, for a few weeks, months, or years.

Position trading is as close to investing as other trading categories, and only passive or buy-and-hold investors keep positions longer. But what strategies and tips do such traders utilize to profit from long-term position holding despite price gyrations?


What Does Positional Trading Entail, and What Are Its Features?

When an asset's price movement is in the long-term trend, position traders try to capture the long-term incentives instead of watching minute daily price changes. While such a trader can take both long and short positions, there's more risk but an inverse amount of potential profit.

A positional trader is less concerned about short-term price movements unless their impact affects the long-term outlook of their positions. It's not active trading but semi-passive position holding, using fundamental technical analysis and strategies to follow historical patterns and market trends.

When learning what position trading is, you'll embrace selling, although an exclusive understanding of investing features buying into long or short trades. It’s a suitable capitalization method for any market, including bonds, stocks, commodities, crypto, and Forex.


An example of a position trade on the weekly USD/JPY chart

Source: https://forextraininggroup.com/position-trading-strategies-longer-term-prospective/


Only by studying market fundamentals can you spot these long-term trends using positional indicators, technical analysis, and an appropriate strategy. The best strategies incorporate attention to a trend, locking profits with a trailing stop loss, and specializing in one financial asset.

You'll also focus on high-value stocks, jumping onto an established trend and exiting only when it ends, and never because the price fell temporarily. A positional trader plans an exit when the time is right and doesn't pay attention to midterm movements or short-term surges like swing trading.


What's the Best Approach to Take in Position Trading?

Since it's a long-term investment, positional traders get involved in significant asset research and technical analysis. Their approach is analytical due to the high risk of holding positions long term, which demands continuous monitoring with detailed analytical tools.

There aren't any standard strategies available for positional traders, but they must have a knack for technical and fundamental analysis, whether using each or both. A techno-fundamental strategy uses charts and trend behavior factors to plot trends based on historical data while focusing on the inherent state of an asset.

Not only does that help to ascertain the right time to buy, hold or sell, but you can also dissect the asset's well-being, value, and security aspects using positional trading indicators. That helps you understand trend patterns and opportunities in price movements, alerting you to possible reversals to minimize risk and maximize gains.

As with any investment, you'll accrue benefits from owning an asset, but the real gain is reaping profits from its increased valuation over the holding period. Reliance on techno-fundamental analysis lets you in on useful market insights, allowing you to plan to move onto, retain, or square positions.

For positional trading to work, you'll need to get a grasp of understanding the market signals that your techno-fundamental analysis tools send out. Whether patterns or trends, it's all about maintaining a grip on the market's direction and price destination of an asset.


What Are the Top Position Trading Strategies and Tips?

You'll need a mix of fundamental and technical analysis to be a successful positional trader since it's necessary to evaluate potential risks and market trends before opening a trade. The most significant risk you'll face is trend reversal followed by low liquidity, which incurs losses due to price trend changes.

To trade positions effectively, it's required that you evaluate your risk profile and freeze capital over long periods. Several position trading strategies that combine market fundamentals and technical analysis to identify positive prospective trends include;


Support and Resistance Position Trading Strategies

By studying support and resistance levels, you will be able to recognize whether an asset’s price will likely rise in an upward trend or fall into a downtrend. Based on this analysis, you'll decide to open a long position on an asset, profiting weekly, monthly, or yearly from its price increases.

You can also open a short position because these levels correspond, aiming to profit as the asset suffers prolonged price drops. Support levels refer to the price an asset won't fall below, where buyers prefer opening, while resistance is where it ceases to rise, and there are no more buys.


Range trading strategy

Source: https://www.ig.com/uk/trading-strategies/how-to-trade-sugar-190318


Breaking through resistance levels indicates that the price will continue rising to reach higher highs. But a break below support is a sign of coming lower lows. When a breakout happens, support and resistance levels change roles. And with this strategy, there are three main factors to consider:


  • Historical Price: It's the most reliable source of identifying support and resistance levels since you can use periods of significant price gains. Or reductions as potential indicators for movements in the future.
  • Previous Levels: Just like historical price indicators, you can gauge future price movements, especially when a breakout is imminent.
  • Technical Indicators: Specifically, the best indicator for positional trading tips will provide dynamic support and resistance levels. That change when the price of an asset changes.

Breakout Positional Trading Strategy

In Forex, commodity, or derivative trading, you'll attempt to open a position in a trend's early stages. Particularly when targeting large-scale price movements. A breakout position trading strategy is similar to support and resistance. Where you'll open long or short positions depending on the asset price’s levels.

As such, you should identify comfortable support and resistance levels as the foundation for your breakout position trading strategy. For instance, if a currency pair consolidates, a trader getting in early on the trend will wait for a breakout. It's more robust when the consolidation is longer.

As one of the risk-alleviating positional trading strategies, breakouts can also occur at the end of a trend. As a sign of an upcoming reversal, signaling a stop-loss exit for positional traders. However, be wary of false breakouts; a competent technical analysis indicator will help you chart actionable trend lines.


Moving Average Positional Trading Strategy

Another valuable tool in positional trading is not necessarily which type of moving average you implement since you're performing long-term trades. As one of the essential indicators, moving averages like the 50, 100, or 200-day signify the beginning of longer trends.

For instance, a 50-period Exponential Moving Average sets the stop-loss below the most recent price swing. When this indicator crosses a 200-day EMA, it indicates a golden cross, meaning the bull market will continue.

The opposite indicates a death cross or bear market. But moving averages tend to lag as indicators, leading to crossovers when the trend reversal has already happened. When that occurs, using this strategy alongside a Relative Strength Index, like a Stochastic RSI, helps correct a crossover.


Position trading with stochastic and moving average strategy

Source: https://www.learn-forextrading.org/2017/05/positional-trading-with-stochastic-and.html


You can confirm a trend by looking for the price to break or close a 200-day EMA when the stochastic RSI indicates an above-level-20 at the beginning of a bullish trend. That's because positional trading tips give the impression of a golden cross before a moving average crossover happens.


Pullback and Retracement Positional Trading Strategy

The pullback strategy is useful for position trading, especially if you've failed to catch the beginning of a trend movement. This is because it offers the opportunity to join at better price levels. The basic idea involves selling long on an established trend, buying back when there's an uptrend, and selling when the price temporarily rises during downtrends.

When using a pullback strategy, you'll look for opportunities to enter the market with price dips. And to eliminate the possibility of trend reversal while that's happening, employ retracements. The most popular retracement indicator is the Fibonacci Retracement, which helps you to identify when to open and close positions.

By drawing Fibonacci retracement lines during a pullback, you can identify solid support and resistance levels to find trading opportunities. The best pullback is soon after a breakout since a market in range for longer will break hard as few traders want to buy against strong momentum.

Pullbacks often have shallow retracements. But with this strategy, you'll buy the swing high on the break and hop onto the trend. Sell after the asset recovers from the downward setback. And extend your position as the price resumes its former upward trajectory.


Range Trading Positional Trading Strategy

In some markets, prices will move up and down without any evident trend. And a range trading technique allows you to identify overbought or oversold assets. The lack of trends is useful to keep you on the lookout for buying or selling opportunities. So you can book profit or square off accordingly.

In position trading, waiting too long, like a buy-and-hold investor, risks your investment return. And price ranges will alert you to imminent reversals. Along with protecting your stop loss below the most recent swing. You'll define where to take profit, signal reversals, and give the market time to breathe.


Bottom Line

A strategy that matches your trading personality and lifestyle is essential to consistent margin-breaking trades. Whether you're seeking long or short-term fulfillment. Positional trading indicators allow you more time between trade decisions compared to the high pressure of swing or day trading.

With these top positional trading strategies and tips, you can trade multiple markets, assets, styles, or investment goals. You can follow trends in stocks that make prolonged moves over weeks and months. With some research and preparation and with a minimal time commitment.


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