In the world of trading, there are various approaches and strategies that each trader takes, to maximize their profits and minimize their losses.

Trade markets can be highly liquid, and at times volatile, so it’s essential that you approach every trade with a well-informed strategy and plan of attack. This may be different for each trader, and even with the same trader, it can vary with each trade.

Therefore, as you begin your trading journey, it’s important to know all the strategies that can aid you in your trading experience, and get you started on the right foot.

In light of this, we’re going to discuss a highly-used and effective trading strategy – position trading.

If you’re wondering how to use position trading, then read on, to find out what it is, as well as some top tips for you, as a beginner, to incorporate into your own trading strategies.

What is position trading?

Position trading is an investment strategy where traders open a trade position on an asset, and then hold this position over a prolonged period of time.

The aim of this strategy is to capitalize on long-term investments, where asset prices will rise over a lengthened period of time. When holding the position, you can ride the value increase up until you feel it’s appropriate to sell.

Let’s use contracts for difference (CFDs) as an example. When position trading with CFDs, you might open a buy position on a particular asset, that might currently be at a low value. However, you predict a rise in the market conditions and hold the position for three years. In those three years, the asset price may have risen exponentially, therefore giving you a substantial profit once you sell.

With strategies like swing trading, the position is held for no more than a few weeks. With position trading, the position is held for months, or even years, before selling. In fact, many position traders execute as few as 10 trades in one calendar year.

Tips for position trading beginners

Once you have the basics of position trading, you can increase its effectiveness further, with some essential tips:

  • Buy cheap. 

This is one of the most important tips for position trading. The main goal is to capitalize on rising prices, so the lower the price when you start trading, the further it has to rise during your position hold.

If you trade assets at higher values, their chances of significantly rising are much lower. Buy low, sell high!

  • Market data is your friend.

Another great tip is to ensure you are conducting thorough research on your potential trades. The strategy’s effectiveness is solely reliant on asset prices moving upward, so you must make sure this will be the case.

Use technical indicators, for instance, to analyze market data, and predict price movements expected to rise greatly over the coming months or years. This will give you more accurate information on which to conduct your trades.

  • Stick to bull markets.

Whilst position trading can very well be executed in any market, it’s best to stick to bull markets, for the best chances of profitable returns.

Bearish markets are often not as successful when selling assets over long periods with position trading. This should be reserved more for day trading, whereas with position trading, high rising assets on bull markets are the key to potential profits.

  • Patience is a virtue.

A pivotal aspect of position trading comes down to your ability to have patience when trading. With all the research conducted and all the skills, you might possess, without patience, your chance of profit will be significantly lowered.

You must ensure you remain composed and confident in your trades, even when there appear to be slight dips in the market. Resist the urge to sell every time you feel nervous, otherwise, position trading will be much harder to execute.

Trust the process, and be firm in your strategy, and you’ll greatly increase your potential for profit.

Position trading can be tricky to master, but with these essential tips at your disposal, you’re more than ready to begin your trading journey with a knowledgeable head start.