What Is Position Trading

Understanding Position Trading

In the simplest of terms, Position Trading is the polar opposite of Day Trading. Also known as Trend Trading, Position Trading is the kind of trading in which traders hold their stocks for months or years together. They are not too bothered with the short-term fluctuations on the stock, because they believe that profits will come in the long run.

It is like a long-term investment plan where even if the stock goes down for a few days, the traders would keep holding their stocks, as they would have certain reasons to believe that the stock would go up again and would give profits a few months or years later. This is also referred to as the ‘buy and hold’ trading strategy.

Is it the same as Swing Trading?

No, it is not the same as Swing Trading. Position Traders hold their positions for much longer as compared to Swing Traders. Moreover, Swing Traders try and gain their profits from the intra-week or intra-month fluctuations on a stock, whereas Position Traders are not bothered about such fluctuations; their focus is on the long-term goals and the profits coming out from that.

What kinds of traders indulge in Position Trading?

Most old school traders are unlike the best forex brokers. They like to continue with Position Trading. For them, this is similar to any other kind of long-term investment plan that would give them great profits in the end. Once these traders have their trust secured with a certain stock, they don’t mind holding it for their lifetime. The stocks in this case are some of the most renowned, respected and famous stocks, of companies that have been existent for years or decades.

Another thing to note is that most traders who get into Position Trading have a set amount of capital for the same, which they are not looking to gain back soon. This means that they have enough security to not look at immediate profits, and are okay with the idea of their money being ‘locked’ in a sense in a stock.

Then there are those who just want to play safe, and do not want to indulge in the day-to-day tracking of graphs and charts to gain daily profits. They only want to look at monthly charts and analyze where their stock is going. This could be because of them not wanting to turn this into a form of gambling, and looking at it as a safe and secured investment area with profits coming in the long run. Or it could also be because of the fact that they don’t have the time to track daily graphs, and hence, want to secure their money for the long run without worrying too much about it.

It is important for Position Traders to understand that once they have made a plan to keep holding their stocks, it is crucial that they stick to that plan. Changing the plans and strategies every now and then while trading is not a good idea. Patience and discipline is really vital in this form of trading.