All about Positional Trading Strategies

Positional Trading Strategies

Position trading is a long-term trading style. Position traders are somewhere in between day traders, long-term investors, and position traders. Position traders are able to stay in the market for a longer period of time, sometimes for weeks or months, before selling off their position to make a bigger profit. If you are interested in position trading, you should be familiar with the common trading strategies used by traders.

What is a positional trading strategy? Position traders are more likely to stay invested for longer periods, which can result in higher profits but also increases the inherent risk for the trader. You could be on the other side of the market if the trend changes. With a strategy, you can identify emerging trends and plan your entry and exit with precision.

While position traders base their decisions on fundamental as well as technical trading methods, the majority of their strategies are based on the technical analysis. You are analyzing a chart and gaining critical insight to help you plan profitable trades.

Passive traders are called position traders. They are not like day traders and don't have to be on the computer 24/7. This makes it more important for position traders to analyze market trends and identify deflections in the current trend.

Common Trader Strategies

Positional trading strategies allow traders to see the big picture and eliminate market noise. Small trend changes are often ignored by positional traders. Therefore, they need strategies that are based on solid analysis and rationality.

Let's now look at the following list.

Support Resistance

The support and resistance lines enable traders to visualize the range in which an asset's price is moving. Resistance is the upper limit. Support represents a lower price limit. This is how you can identify support and resistance levels in an asset's price.

Historical data can be used to determine support and resistance levels. Future price movements are determined by traders who consider periods of large gains and losses.

When a breakout occurs, support and resistance are rearranged. To understand the movement of an asset's price, traders take into consideration previous support and resistance levels.

Fibonacci Retracement provides a technical analysis that helps to understand dynamic support levels and resistance levels.

Breakout Strategy

Breakout trading is when traders wait for the price to cross the resistance or support level. The trader will enter a long position when the overhead resistance is broken. He will enter a short position if the price crosses the support line. This trading strategy is a good one if you can identify the support and resistance levels.

50 days and 200 days EMA Crossover

For positional trading, the best moving averages for positional strategy are those with EMA's of 50-days or 200-days. Traders seek trading opportunities whenever the moving average lines intersect.

The golden cross is when the fast moving average crosses over the slow MA line below the intersection point. This signifies a bull market moving forward.

In contrast, a bear market is indicated when the 50-days MA crosses over the 200-days MA. Death cross is the point at which intersection occurs.

MAs, however, are lagging indicators. This means that by the time the crossover occurs, the trend reversal already has taken place. This problem can be corrected by traders combining stochastic RSI and MA lines.

Stochastic RSI refers to calculating RSI by using the stochastic formula. To correct crossover flaws, traders combine moving average lines with stochastic RSI on their trading charts. The formation of a golden cross will be indicated by RSI before the MA crossover.

When the stochastic RSI crosses the 20-level, it indicates a bullish trend. But, it needs to be confirmed before we can react.

For confirmation of the trend, price should break above the 200-days EMA to confirm it. The 200-days EMA, which is the most powerful MA in positional trading is regarded as a signal strong enough to respond on. This strategy places the stop-loss just below the latest swing down in a trade.

Pullback, Retracement Trading Strategy

When the market is moving upward, pullbacks are brief moments of market reconciliation. To plan entry, traders look out for pullbacks when they are part of their trading strategies. It is best to sell high and buy low. When the market falls during a pullback, traders can enter it. They need to ensure that trend reversal does not occur during pullback. Fibonacci Retracement is used to do this.

Fibonacci Retracement allows traders to determine when to close or open a position. They would draw Fibonacci retracement lines on the price charts at 61.8, 38.2 or 23.6 percent. These lines are used by position traders to identify support or resistance lines and then apply for trading opportunities.

Trading

Range trading is used by traders when the price fluctuates between periodic highs and lows without any apparent trend. To identify oversold assets and assets to purchase or to sell, traders use price range methods.

Conclusion

To recognize market movements, positional traders often use both technical and fundamental analysis. These strategies can be difficult to follow for new investors. However, if you're just starting to explore positional trading these strategies will help to make you more confident.