What is position trading – and what’s the goal?

There are a whole host of different sub-types of trading out there, and it can feel tough to keep up with them all. Position trading, as it is known, is one of the most interesting ones. It relies heavily on the use of technical indicators and price charts and is all about waiting for a particular profitable price point to be reached – which means it doesn’t always fall easily into the short term versus long-term binary that most traders use to categorize the strategies on offer. This article will go into more detail about what position trading is, and what the goals of those who subscribe to it might be.

Basic definitions

At a basic level, position trading refers to a practice of closing investment positions based on the achievement of a particular position on the price charts. A position trader might, for example, choose to hold their position open only until what they consider, based on research, to be that particular asset’s peak.

It’s illuminating to look at position trading in contrast to other potential modes of trading and to examine the differences. Often, these differences are linked to time periods, and the moments at which actions are taken in each trading paradigm. Take, for example, day trading: this sort of trading requires the trader to close their position in a short space of time, usually less than a day.

Often, a day trader will close their position in hours – and either take their profit or cut their losses. If a position trader sees their asset reach its goal position in minutes, they will normally close faster than a day trader might. If their asset doesn’t reach it for weeks, they may well keep it open for much longer than a day trader does.

How do position traders work?

Position traders are likely to spend a lot of time looking at price charts in order to work out what path the asset they are trading is likely to follow. They may attempt, for example, to spot peaks that have already happened and look for patterns. Or they may decide instead to run price data through a tool used to predict how and when future patterns may materialize.

It’s also important to note that a position trader requires a decent broker. Unlike some trading methods, such as scalping, position trading is rarely banned by brokers. Traders should instead be looking for a broker that offers sophisticated price chart monitoring technology given that technical analysis and position-spotting is crucial to the strategy. At a minimum, there should be a wide range of time frames and technical indicators offered. To secure these features, doing some research at an information repository like AskTraders makes sense. Their Tradeo review is just one example of content that traders can use to spot in advance whether the broker is likely to help or hinder their position trading goals.

What’s the aim?

As a trader, your ultimate goal is to make back your initial investment and more – a profit. It’s important for traders to always keep this in mind. While it’s all very well to have a number of small, short-term sub-goals up your sleeve in terms of positions reached, stop losses set and more, the overarching goal has to be in making profit.

For a position trader, the short-term goals might include identifying when a position is likely to be hit or setting up an alert if there is a sudden move to or away from the position in question. In the end, however, these should always be linked to making a profit: getting too bogged down in the intricacies of position charting systems or technical analysis could lead to losing sight of this end goal. Holding your nerve and managing the asset to the designated position as outlined by a pre-defined trading strategy is the most important part of the task.

Overall, position trading is best understood in terms of its relationship to timeframes. Position traders are committed to waiting it out until the asset they are trading reaches a certain point when they can follow their strategy by closing the position and liquidating the investment. And while it’s the case that anybody in the trading world can become a position trader if they so wish, it’s likely to suit those who have a technical analysis background – and who, crucially, can hold their nerve and stick to their pre-defined plan.

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