Friends, those who are old in trading, they would know what positional trading is, but for those who are starting in trading and want to make a career in the stock market/trading, it is very important for them to know what positional trading is. This article will be completely on positional trading, what is the meaning of positional trading, what is the difference between intraday trading and positional trading, what is the difference between positional trading and investment, how to identify positional trade in trading and what are positional trading strategies.
What is Positional Trading?
Positional trading is a part of trading. Let us assume that positional trading is a branch of trading like other branches are intraday trading, swing trading, and scalping trading. In positional trading a trader does not work for short-term profits but for long-term profits.
When a trader takes a trade-in positional trading, it is not predetermined when he will exit that trade. He can stay in that trade for 2 days, he can stay for 20 days, and he can stay for 2 months. The analysis is also done differently for taking positional trades. Because the time period is not fixed in this, trade analysis is done keeping in mind the longer time period.
Although there is always a risk in the stock market, in positional trading, the risk is less than the rest. With the up-and-down shocks that a trader has to bear in intraday trading or in scalping trading, the trader survives in positional trading.
First of all, a trader should recognize his nature, whether he wants quick profit or he wants to earn profit by keeping some patience and giving some time.
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| Chart for positional trading |
The above chart is of a Voltas, it is a perfect example of positional trading, From August to October, Voltas stock has gained a lot of momentum. As soon as Voltas stock formed a bullish marubozu candle from near 200 ema, the stock did not stop and continued to climb higher. I will further discuss positional trading strategies.
You also see the volume, Voltas stock was bought with tremendous volumes during this period. Volume is a great indicator to confirm any trade in the stock market.
Had the same trade been taken in intraday, the trade would have walked away with 5-10 points, but a positional trader would have made huge profits.
Difference Between Intraday Trading and Positional Trading
| COMPARISON | INTRADAY | POSITIONAL |
|---|---|---|
| PROFIT | LOW | HIGH |
| RISK | HIGH | LOW |
| TIME PERIOD | ONE DAY | 2 DAYS TO INFINITE |
| CAPITAL | CAN TAKE FROM TRADE | HOLD |
| ANALYSIS | SHORT TERM | LONG TERM |
By looking at the above table you must have got an idea what is the difference between intraday trading and positional trading. If you have any questions, then ask in the comment box I will try to answer.
Advantages of Positional Trader
1. The biggest advantage to the positional trader is he is saved from day-to-day market volatility.
2. The positional trader remains in the movement for a long time, whether it is for weeks or months.
3. positional trading saves time as there is no need to sit in front of the trading screen all the time.
4. While doing positional trading strategies, you come to know about many trading strategies.
5. While doing positional trading, you are able to do maximum research, and you get a chance to understand the stock market in detail.
Disadvantages of positional trading
1. In positional trading you have to block money for a long time.
2. There are many times when traders think “I have taken the stocks for a long time, so what if it is falling now, but it will go up”, but this does not happen every time. So you have to be very cautious.
3. Sometimes when a trend reversal happens, a positional trader may not be able to capture it.
4. In positional trading you can only take trades on the buy side. You cannot take positional trades on the sell-side (shorts trade) except futures.
I have given only 4 points in disadvantages because it is my personal opinion that positional trading is a million times better than intraday trading.
Top 5 Strategies for Positional Trading
1. 200 ema breakout
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| UBL chart |
If you don’t want to do much brainstorming, then just put the 200 ema on the chart and keep an eye on it as soon as the price crosses above 200 ema with volume then enter the trade.
Above is the chart of Ubl, on 19 Nov 2020 Ubl gave a breakout above 200 ema then the price was 1050 and by 14 Jan 2021 price reached 1300.
2. Breakout Trading
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| Bharat Forge chart |
Breakout trading is one of the best trading strategies. When a price breaks out of a pattern, the trader must take advantage of it.
The above chart is of Bharat Forge, you can see for yourself how tremendous movement came in this stock after a breakout of the peanut pattern. This stock did not take much time to reach from 670 to 900.
3. Resistance Breakout Trading
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| Cummins Chart |
As many strategies I am telling you, do not apply directly to the market, first practice, do paper trading, and then start trading in the market.
The above chart is of Cummins, there was multiple resistance at 1285 and when the price broke this resistance, there was no looking back. Cummins stock still trades at 1620.
4. Rang Trading
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| Indian Bank Chart |
The above chart is of the Indian Bank. This stock had formed a range between 130-170, only that range is to be taken advantage of by a positional trader. Buy from where there is support at 130 and sell from where there is resistance at 170.
5. Trendline Strategy
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| Jubilant Food Chart |
The Above chart is from Jubilant Food. Friends trendline strategy is a very amazing strategy. Something similar was seen in the stock of Jubilant foods as well. Whenever the price has hit the trendline, then went upwards and the day it breaks the trendline and closes below the trendline, on that day you have to exit your trade. (Highlighted in the picture)
Friends, there are many strategies, but a trader should practice with commitment, and observe these strategies in live sessions, when confidence comes, start with a little capital.
The Key Takeaways
The positional trader does not need to keep much tension of the ups and downs of the market in his mind. Sometimes it’s enough for him to be tracking his position.
A positional trader earns more profit because he holds his trade for weeks, and months so he can take advantage of the movement in the stock.
Positional trade is for a long period, so a trader has to do technical as well as fundamental analysis. This is a very good thing for the trader as it helps the trader to do more research and understand the stock market better.