Today we will talk about the features and secrets of positional trading. I will talk about secrets, nuances, profitability and fix everything on live examples. Do not switch, there will be a lot of useful information 🙂
Position trading is a type of trading in which a position is held for a long time (several days or weeks) with an overnight transfer. Very often, many sources indicate that this is a long-term type of trading, but here I do not entirely agree. One way or another, I believe that it is trading that is still holding a position for up to several days or weeks. Well, up to a maximum of 1-2 months. Anything from 2-3 months or more is closer to investment. Well, in real life, there are practically no traders who so much hatch in a position. And in order to make some long-term deals, it is already important to understand not only the technique, but also to conduct fundamental analysis, diversify, and so on.
And based on technical analysis, this is scalping and intraday trading, we talked about it in the last lecture, here is the link. Or just a positional type of trading, but for me it is either an option with holding a position from 2 days to 10. Sometimes it happens up to a month, but much less often. Entrances at the same time on m60. Although I also do the analysis on a daily basis. I enter some of my models on day trips, but often I still try to enter more selectively and more often switch to the m60.
I almost never sit in a position for more than a month. And I think that for more than 2 months it’s not really trading anymore, it’s closer to investing. A variant of more active portfolio trading. That is, there you need to look at the fundamentals a little more carefully, understand the macro data.
Positional trading also includes swing trading. Although it is believed that this is a shorter option for holding a position up to 2-3 days.
And I still clearly divide the deals for myself. Or I plan within a day, and if I decide to postpone, then more often up to 1-2 days. Or I initially plan a deal as a more positional one and subdivide for myself into a short-term and medium-term option. In the first case, the goal is from 2 to 10 days. In the second, up to a month, sometimes a little longer. From the point of view of classical investing, short-term and medium-term are longer periods, but this is my personal classification for my trading. The point here is this. If we are planning a position with a longer holding, then we need to assume that the stops will be larger, we will sit out large rollbacks, that is, there is a slightly different approach to holding the position. Since, as many probably understand, any trend comes with pullbacks and corrections. And accordingly, if the goal is even longer in terms of retention, then there are some nuances here. But we’ll talk about this a little further and consolidate and practice with examples.
What instruments can be traded positionally?
In general, as with active trading, you can trade any instrument or market. Stocks, futures and even crypto. Well, for futures, just do not forget about expiration and take this into account if a position with a longer holding is planned. Sometimes it makes sense to immediately buy the next contract. By the way, from a short, I often just either trade intraday, or hold a position from 2 to 10 days. But everything that is longer is more often already from the long.
In what cases can this type of trade be used?
This trading option can be more comfortable for those who work and it is easier to combine it with other activities. Although, as I noted in the last lecture, I perfectly combined even the active type of trading, including working out some transactions in the evenings. Well, here again, to whom it is more comfortable. It all depends on how busy the work is, how tired the person is, and in general on the psychotype. Too active trading option is not suitable for someone and it is psychologically easier to hold the position longer.
Well, here, as always, the right choice of tools is also important. One way or another, this is not an investment where it takes even less time, it is still important to wait for the desired entry signal and not miss it. And so periodically have to monitor the market. In the evenings, or sometimes opening the terminal from the phone.
Profitability of position trading
As I noted in my lecture on intraday trading, it is naturally capable of generating more returns. Intraday trade in the sense. But then again, when I posted my trading results (section about me) 170 percent for the year (without leverage), all models were included. And active models and positional and so on. Although at that time there was still a separate positional account. Therefore, positions with a longer hold were mainly made on a separate account. In any case, with the growth of capital, you will not be able to use many active models, so attacks or otherwise transactions will be more positional and profitability will decrease.
I consider a return of 50-60 percent per annum is already a very steep return for positional trading for big capital, without using leverage. Well, in the long run. In short, the conclusions will be incorrect. While there is zhor and euphoria in the markets, it was quite possible to jump into the trend and even a beginner who trades without stops, ride on the move and show a large percentage of profitability. And big capital could be poured in. But everything will change when the market goes into the saw or is falling. With this approach, you can merge. And those who trade from the stop and observe the risks will continue to earn. But only stops naturally cut profitability, but give stability. If of course you know how to set them correctly.
Position trading risks
Here, in fact, as for intraday trading, everything is individual. If you do not make friends with your head, you can merge with any style of trading quite easily and successfully. I believe that if you strictly control risks, then you can earn money on any style of trading or instrument. It is believed, for example, that a futures instrument is more risky. Well, of course, if, again, the risks are not observed. You can get more leverage there. But if this is not done, both in stocks and in futures, adequate risks can be observed. And even options. Many people think that options are just horror horror, you can’t trade there. But if you do everything correctly, then options are no more dangerous than futures or stocks. Moreover, sometimes it is even safer if everything is done correctly. Moreover, it is a cool tool for hedging risks.
There are many examples when they merge perfectly in stocks. Having loaded with a shoulder and trying to sit out the drawdown.
I will immediately note such a moment, it will be important later for finding entry points. This is a basic principle that I think many understand, but still beginners read this article, so I will repeat.
The trend always goes with several phases (the screen above), that is, there is an accumulation phase (sideways is indicated by green lines) and a distribution phase, this is the movement itself. That is, in fact, gasoline is accumulated in the accumulation (outset), which is then consumed as the movement grows. Any trend always comes with such flats, accumulations and corrections. The stronger the movement and momentum, the stronger the correction can be. And in positional trading, it is important to catch larger movements, unlike intraday, when we catch a local trend within one day.
Let’s say if within a day and in scalping you can trade and jump into movements when the instrument is already showing good growth, it may even be overheated, or if there were small accumulations within this growth, then within more positional transactions, it is extremely important that there are good long-term accumulation, ideally of course from 8-10 days. That is, the potential for exiting such accumulations is always greater. And if the breakdown is not false, you can pick up a good movement.
If you try to enter after exiting small accumulations, or when the instrument is overheated and shows many days of growth (if we consider the long option), then you can make many mistakes. From a short stop, it will not work, and so on.
At the same time, we always look at the overall dynamics. If an asset is in a protracted long-term saw for several months, the levels are incomprehensible, and there is no trend or trend, then there is no point in trading it. You should always trade only what you understand. And at the same time, if there is a good long-term trend (let’s say more than a year), or a medium-term trend of 3-4 months, etc., then this is always a more interesting option for working out.
For more practice and examples, see the video below from 8 minutes. Don’t forget to subscribe to my social media as well. networks (buttons on the side), there is a lot of useful information.
Sincerely, Stanislav Stanishevsky.