Holding a position for a long time increases the inherent risk, although it offers increased profit potential. Discover the best position trading strategies most used by traders.
What is position trading and how does it work?
Position trading involves holding a position open for a long time. Therefore, an investor of this type gives less importance to short-term market fluctuations and usually holds a position for weeks, months, or even years.
Position trading can refer to speculation on the price of a good or an investment. Investing is the most common form of position trading, many investors hold long-term investments in equity portfolios, equity or pension funds. However, investment is limited to long buy positions, while position trading through Turbo24s , barrier products, vanilla options and CFDs also allows you to take a sell position.
Quite often, position investors use fundamental analysis and technical analysis to assess market trends and potential risks before opening a position. The strategies below can be used by position traders to analyze price charts and predict market movements.
What are the best position trading strategies?
an asset to determine whether it will fall and take a downtrend or rise to take an uptrend. . Based on their analysis, investors can decide whether to open or close their position in a particular asset.
The support level is the price at which an asset is likely to find it difficult to break down, as investors tend to buy around this level. Conversely, the resistance level is the point on a chart where an asset’s price stops rising. In this case, investors can choose to close their position and take the profit or keep their position open only for the price to fall.
A allows investors to analyze graphical trends. This is a useful skill for an investor who wants to take a long-term position on specific assets.
Historical price : is the most reliable source of information for identifying support and resistance levels. Generally, periods of significant price increases and decreases are used as important indicators of future variations.
Similarly, position traders can use previous support and resistance levels as an indicator of future variations. For example, if a support level is broken, it can turn into a resistance level for future orders
Finally, technical indicators , such as Fibonacci retracements explained below, provide support and resistance levels that move with the price of a given asset.
Disruption strategy
The breakout strategy involves trying to hold a position during the initial phase of a trend . A breakout strategy usually forms the basis of large-scale trading on price swings.
An investor adopting a breakout strategy will open a long position once the stock price breaks the resistance level or open a short position if the stock drops below the support level. For a breakout strategy to be successful, you need to know how to identify periods of support and resistance in the market.
Range trading strategy
The range trading strategy is most effective in a market that constantly alternates between ups and downs. Forex investors particularly benefit from this because the currency market does not always have a clear and obvious trend.
Investors who have identified overbought and oversold assets are those who benefit most from this strategy. The objective is to buy oversold assets and sell overbought ones. An “oversold asset” here means that it is approaching the support level, while an “overbought asset” is approaching the resistance level.
Pullback Strategy and Retracements
A pullback is a temporary dip or very brief price reversal in an asset’s primary uptrend. The pullback strategy can allow investors to capitalize on these drops or breaks in the asset’s price within its uptrend. The goal is to buy low and sell high once the asset breaks out of the pullback and continues its uptrend.
