How to benefit from position trading strategy
In general, there are three trading approaches used by traders in the context of time frames. First, there is the day-trading approach in which traders open and close the position within the same day. This group of traders usually doesn’t allow open trades overnight i.e. you start and finish the day with a clean slate.
The second category of traders is arguably the most populated one. Swing traders tend to hold a position in the short term, from as short as a few days to as long as a few weeks. The time horizon for them is less important as it is the market swing they are trying to catch.
Finally, the position traders are those who look at markets from a bird's perspective. Their aim is to analyse the markets and open/close a few positions throughout the year.
What is position trading?
Position traders focus on the big picture with an aim of capturing big moves - and big moves need time to develop. Hence, these types of traders are mostly interested in longer term price moves in the market and the overall trends and cycles of the market.
Unlike the day trading, or swing trading, position trading is mostly based on the fundamental forces that move the markets. Hence, junior traders without in-depth knowledge of fundamental factors are unlikely to take this approach to trading the markets.
For this reason, position traders are usually banks, funds, or other types of institutional investors as they have the resources to identify market-moving trends and get to the bottom of them as one has to go through market data, general market trends, and historical patterns, which takes a lot of time and resources.
As every other trading approach, position trading has pros and cons. Positive sides of this approach are:
Of course, position trading is associated with some risks: