Position Trading Explained
What is position trading and how does it differ from day trading? Like day trading position trading is a type of short-term trading. But unlike day trading in which stocks are held for one trading day only - a position trader holds his stocks for a longer period.
Day traders never hold stocks overnight but a position trader may hold a particular stock for a single day to several weeks or months. Position traders try to pinpoint stocks that, according to analytical trends, should make a significant price movement. It may take several weeks or months for the final financial picture to emerge for these stocks. This is the essence of position trading.
Like all trading types, position traders need to prepare thoroughly if they are going to outwit the markets and their competitors. It also takes plenty of practice before you will get ahead in the position trading game.
Position traders make use of a variety of techniques to predict the trends of a particular stock. Long-term charts and analyses are used to measure the trends for longer-term trades. Many investors favor Gann and Fibonacci tools to determine the appropriate yardsticks for when to buy and sell. Position trading has the benefit of giving an investor a little more time to make a decision than does intra-day trading.
Most position traders track their trades on a daily or weekly chart. If you've done your homework all you need to do is react appropriately. Some investors keep 'positions' in core stocks like IMB or others over periods of years. The risks of position trading can be minimized by taking some profits and adjusting your stops to break even. This means that if a stock dies you will make money and if they don't you have bought stock at low, low prices.
Those who want a future in position trading must never let their emotions interfere with their trading strategy. Learning how to react rather than think is a valuable tool. This means you need to know your tools and know your trades. Position trades can make money, lots of it - but not if you don't know what you are doing.
