The Ultimate Position Trading Strategy Guide

A position trading strategy is one of the most common techniques when it comes to long-term trading tactics. However, position traders are not mainly those who use longer time frames to trade different assets. They mainly refer to those, who settle somewhere between day traders and long-term market participants.

The idea of every position trading strategy is to rely on technical analysis and financial market fundamentals. So, if you opt for any of the available strategies, you will have to deal with charts and patterns a lot. The main mission here is to use technical analysis in order to have a more in-depth overview of asset sentiments. What’s more, analytics delivers essential insights that help to plan successful trades with improved decision-making.

The Idea of Position Trading Strategy

As stated earlier, position traders stick to expanded time frames. They stay invested longer if compared to day traders. It may take them weeks or sometimes even months to close the trade and make a bigger profit in the long run. If you decide to use this technique, you need to act as a patient and passive trader.

Also, you will need to rely on various technical indicators and charts instead of being glued to the monitor watching the slightest price or trend vibration to make an instant move. The strategy will keep you in touch with emerging trends. Besides, it delivers better chances to ensure the best market entry and exit point. All you need is to select the strategy that applies to your particular trading style.

Let’s have a look at some best position trading strategies used by both experienced pros and beginners.

4 Best Position Trading Strategies

You should note that when we say “best”, we mean the most common strategies as well as the ones that have proved to be effective. You are not obliged to stick to them. Traders work out their own effective tactics. However, any of the following might appear to be a solid basis for further strategy development. At least, you will have a clear understanding of how position trading works.

1. Support and Resistance Position Trading Strategy

The main principle of support and resistance is to visually show how the asset price moves between particular ranges. The idea is very simple. We have the support line on the one side (the lower price limit) and the resistance on the other (the upper level).

Here are some crucial things to consider when using this strategy:

  1. It is possible to generate the historical asset price using technical indicators. This helps to identify reliable support and resistance levels. You will be able to spot significant potential losses or gains and plan your moves beforehand.
  2. It is required to consider previous support and resistance levels to see them changing roles in case of a breakout.
  3. Some traders use Fibonacci Retracement in order to understand the nature of dynamic support and resistance.

2. Breakout Position Trading Strategy

The concept is very simple. All you need is to sit and wait until the price will break through the support or resistance levels. When you see it crossing any of those lines, you may decide if it is time to enter the market with a long (the price breaks the resistance line) or short (the price breaks the support line) position. The strategy will work great for those who can identify periodical levels.

3. Pullback Position Trading Strategy

When the market rises upwards, the moments of reconciliation might take place at some point. This is the best time to plan the pullback and enter the market. The main idea of the concept is to sell an asset at its low and buy at its high. The only challenge here is to reduce risks and potential losses that may result in the trend reversal. This is where Fibonacci retracement may come in handy.

4. Range Position Trading Strategy

Once again, the tactics require tools and skills to spot the periodical levels (highs and lows). This is where no trend is needed. You will need to consider the asset price and the trading volume. When the oversold instrument is spotted, it is a signal to buy it and vice versa, when the asset is overbought it is time to sell.

The Bottom Line

To choose the best position trading strategy for your particular trading style is pretty simple. All you need is to consider all tools, indicators, and trading charts you plan to use in order to understand the market movement and recognize the asset move. Not all of the described strategies are as easy to follow as they may seem, but with deep knowledge of fundamentals and technical analysis, you will hardly face problems.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.