What is position trading?

It is a trading approach that aims to profit from the medium to long term trends in the financial markets. Moreover, it is a prolonged swing trading that goes beyond the medium term. A typical position trade can remain in place for a quarter or year. Though it is a type of investments, it does not last more than

a core investing. Note that a typical investment may last for four years or more.

Amongst those masters are the hedge

funds, big financial institutions (banks) and private professional traders.

That group is also subdivided into two:

1/ Technical position traders 

a/ Fibonacci,

b/ Elliott wave principle market forecast,

c/ the surge in trading volume,

d/ predictive fractal patterns,

e/ and other proprietary trading systems.

2/ Fundamental traders

Really, a position trader is a fundamental traders. He or she does not primarily rely on technical indicators such as MACD, stochastic, RSI, price patterns or the advanced technical trading tools like the technical position traders.

Instead, fundamental traders use the fundamentals such as the balance sheet, financials, economic news, market sentiment, market indicators, geopolitical factors and the central banks' policies to put in place a resilient position trading strategy.

It is about how to position trade as

a technical trader. Indeed a technical position trader often uses three time frames:

1/ the quarterly chart (for the trading set-up)

2/ three-day chart (for the trading signal)

3/ and the three-hour chart for the trade entry.

Note that others technical traders also use the same method with the following time frames:

Quarterly, weekly and four-hour charts or

quarterly, three-day and four-hour charts.

As a professional position trader, one will validate the quarterly technical trading set-up on the yearly chart before waiting for clear cut trading signals on the weekly chart.

It is about how to position trade using the fundamentals.

After the bearish financial crisis of 2008, the US Federal Reserve began a never seen before devaluation of the US. Dollar

at the start of 2009 (quantitative easing or low interest monetary policy). Consequently, US wealth managers transferred funds into other favourable parts in the world (Brazil, Switzerland, Japan and China). They also bought commodities (such as gold and silver) and US blue chip stocks.

Moreover,  smart position traders who spotted the bullish money flow in those sector timely took positions

accordingly by

a/ buying commodities,

b/ selling the US Dollar,

c/ and buying US stocks.

Note that those position trades were very profitable as the long term investors also took positions.

One does not become a competent position trader by chance alone or by skipping the ultimate basics of a professional position trading requirements such as:

1/ Thorough understanding of how the financial markets work (outflows and inflows of money in the markets).

2/ Thorough understanding of each group of financial market participants.

3/ Hands on grasp of market cycles.

4/ In possession of large sum of money to survive the drawbacks in this messy financial markets.

5/ Ability to recognize overbought or oversold assets before it is too late.

6/ A disciplined solid money management.

7/ A sharp competence in market timing without which one may be right but lose.

8/ The ability to adopt a robust defensive position trading strategy or hedging.

9/ Be humble to accept losses before they grow big.

10/ Being ready to harvest profit in due course without leaving too much money on the table.

11/ Always using a top-down trading method (for technical position trading).

12/ Be able to combine the technical analysis and fundamentals.