What is Positional Trading? Best technical Indicators for Positional Trading
Positional trading is another form of investing where people hold their positions long-term with the expectation they will become profitable. Useful is subjective but there are general guidelines you can use when seeking out best indicators for your position trading. Everyone wants to earn huge profits by stock trading. However, very few people succeed in it. What happens to others? Why are they not able to hit the Bull’s Eye?
The answer is simple, they don’t remain consistent with one strategy and keeps hopping. The traders follow several stock trading experts and try to use the tips and tricks given by everyone.
It is pronounced that they end up with making marginal profits and sometimes, loss!
Experts say that one who follows a fundamental strategy such as positional trading and works on it gets a remarkable success consistently.
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The blog talks about the salient aspects of positional trading.
What is Position Trading?
Before we move further, let’s understand what positional trading is?
It involves holding a stock for a few days, weeks or months; sometimes, a few years. Yes, patience the key here.
The concept is not very much different from other long-term investment strategies where you remain invested with the expectation of reaping good profits.
It doesn’t mean you don’t have any selling opportunity here. The positional trading also includes selling opportunities based on positional trading indicators. They are derived based on fundamental analysis. Hence, they are accurate.
What are positional trading indicators and how are they useful?
The long-term positional trading strategy uses 200-Day EMA, 50-Day EMA to decide the fate of the stock holding.
These exponential moving averages are considered the best averages to evaluate a positional holding. Just by checking the moving average crossover, you can understand the overall market trend for that stock.
When the 50-Day EMA crosses the 200-Day EMA, it means the market is bullish (the Golden Cross).
The reverse indicates a bearish market (the Death Cross).
The third indicator, the RSI indicator is used to determine the appropriate time for profit booking.
Buying when the stock price closes above the 200-Day EMA would be the right strategy. Since 200-Day EMA is considered the most potent positional trading indicator, it determines the direction of the trend.
It is essential to have a thorough understanding of the trends before you move further.
When the positional trading strategy is used, the chances of reaping profit increase phenomenally. It is a time-tested strategy that always works.
However, it is essential to have a long-term perspective, a lot of patience, and the capability of ignoring short-term market turmoil.
Nothing can produce wealth other than having a long-term perspective and the power of compounding.
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