Position Trading is the method of trading apt especially for part-timers and for those who could not spend their days watching live trading charts. Position Trading is holding onto a position for a long period, sometimes stretching to months or even longer, in a conjecture that the stock prices will rise over time.
Not that you can’t be a position trader if you could afford to scrutinize the charts all day, but most do not have the privilege unless s/he decides to take trading for their career. It all falls down to your preferences and goals when it comes to choosing the suitable method of trading. Looking to short wouldn’t suit the style of position trading, while it blends perfectly with day trading. Meanwhile, you wouldn’t be able to make profits from daily fluctuations of prices following position trading either.
Position Traders use a combination of technical and fundamental analysis to arrive at the conclusion regarding the prospects of a specific stock. The methods include the use of technical indicators, historical data, volume of the stocks, advent of the competitors, leadership decisions, state of the economy, and anything which can impact the stock directly or passively.
Advantages of Position Trading:
1. Less Stress
You are immune to short-term highs and lows of the stocks as your eyes are set months away from the current trend. And so you need not worry about the dips as the target you have set is the result of your meticulous analysis.
2. At Your Convenience
As mentioned before, you need not crunch down the numbers of live charts 24/7, and you definitely don’t need a deft hand to clutch the profitable trade. You can recline to a comfortable position and contemplate on your next step before actually taking the step. Position Trading proffers you a little extra time to decide on the trade.
3. A Quick Clutch on the Trend
Holding the position for an extended period of time enables you to capitalize on the robust changes in the trend. It also delivers you with ample exit options to get off with bountiful profits reducing the chances of losses.
4. Low Maintenance
Once the analysis is done and the entry point is calculated, all there is to do is exercise the strategy and be aware of the market situation from time to time. Position trading takes fewer hours of toil when compared to the day trading and other alternatives to reap the benefits.
However, there is a major disadvantage in position trading. You should have a large sum of money in your account. The reason behind is when the market goes on a downward trend, you will be asked to deposit more money into your account to flow with the market; or when your prices close your margin, you will be forced to sell your position which incurs heavy losses. Another risk is that your large sum of money gets locked into the trade eliminating your opportunities to invest in other good trades for there is less capital to risk.
Trading is one of the most profitable ventures you can ever undertake. While the risk involved in trading is unscratchable, it doesn’t affect the profit potential in any way. Although most of the people strive to earn more, the fear of loss hinders them from pursuing the path of towering profits. It is also not right to ask you to discard your fears as that is one thing that stops you from overplaying your hand. With the right technique and strategy, trading is the ideal amplifier of wealth.