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:
- 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.
- It is required to consider previous support and resistance levels to see them changing roles in case of a breakout.
- 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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