Guide to Positional Trading Strategy

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Guide to Positional Trading Strategy

Positional traders focus on trends and asset performance over the long term. They assume that a trend will continue. This strategy uses fundamental and technical analyses to find opportunities and holds assets longer than swing traders but shorter than buy-and-hold investors.

Advantages of Positional Trading

  • Reduced Short-Term Risks: Longer holding periods mean less exposure to daily market noise.
  • Lower Transaction Costs: Fewer trades result in reduced fees and commissions.
  • Capitalising on Trends: Gains are maximised from significant long-term price movements.
  • Leverage Availability: Assets can be used as collateral, offering flexibility.
  • Minimal Involvement: Less time-consuming compared to day trading.

Disadvantages of Positional Trading

  • Market Risks: Long-term exposure increases vulnerability to market downturns.
  • High Capital Requirements: Substantial funds are needed to absorb fluctuations and maintain diversification.
  • Emotional Strain: Holding positions for extended periods can test patience and discipline.
  • Missed Opportunities: Focus on long-term trends may overlook short-term profit chances.

Common Positional Trading Strategies

  1. Support and Resistance: Identify price ranges to plan entries and exits.
  2. Breakout Trading: Trade when prices break past established support or resistance levels.
  3. EMA Crossover: Use 50-day and 200-day exponential moving averages to spot bullish or bearish trends.
  4. Pullback and Retracement: Leverage short-term price dips to enter trades.
  5. Range Trading: Capitalise on predictable price movements within specific ranges.

Is Positional Trading Right for You?

Positional trading may suit you if you like staying passive but can ride long-term trends. In bullish markets, it yields large profits over time. Day trading may work better in bearish or stagnant markets.

Positional trading requires discipline, market knowledge, and technical and fundamental analysis. Prepared to explore? Start trading with Angel One now!

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.