Positional trading is the practice of buying an investment by the trader in the long-term expectation that its value would rise. This type of trader is less disturbed by short-term price swings and the day's news until they alter the trader's long-term perspective on the meaning of position in the stock market.

Traders that employ positional trading strategies are known as position traders. Following this market trend might result in several lucrative opportunities.

Positional trading is based on the idea that stocks are acquired and held based on a trend or theme that is expected to take off, and that the stocks are sold off to earn money when the trend hits its peak and the industry enjoys tremendous growth.

A position trader recognizes the market or economic trend and makes investments in the stocks of those businesses in line with it. These tendencies might be sector-specific, cyclical, or even long-term.

Examples of such trends include the rising demand for electric vehicles, the production of renewable energy, etc. Such patterns are based on several variables that may be found using a variety of strategies.

 

The trader often employs a variety of strategies to pinpoint trends, including technical and fundamental research to gauge market mood.

Macroeconomic considerations are a significant additional source for trend detection. In addition to these three, historical prices, patterns of price variation, and other pieces of information are also employed to determine trends.

Pros and cons of positional trading – An Overview

Profiting on a stock's brief volatility is possible with position trading. It's not for everyone, but it might be a decent approach if an investor or trader want to quickly trade in and out of equities.

The advantages or pros of positional trading

Due to variety of factors, the positional trading method is regarded as one of the best. A trader is more inclined to invest more money and increase profits if they are aware of the realistic odds that a trend will resume shortly through positional trading.

The following are the advantages of positional trading –

·         Positional trading is a long-term approach that has the potential to provide substantial profits.

·         The positional trading method benefits from significant stock movements that last for weeks or months.

·         Positions do not require daily review as such, the trader is less worried with them than with some short-term strategies

·         The positional trading method only requires time spent researching potential equities, freeing more time for other transactions or work-related responsibilities.

Pros or disadvantages of positional trading

The trading notion of positional trading is one that is somewhat long term. Prior to the trend's climax, a significant amount of capital is blocked. A reservoir of money must be accessible to take advantage of possibilities as many trends may emerge at once. Even though price changes are often short-lived, when they are significant, there can be a significant washdown of money. The other disadvantages of positional trading include-

·         Some traders disregard recommended asset allocation strategies, and if they do not diversify their holdings, it might lead to severe losses.

 

·         Positional trading can result in huge losses if the trader is unable to foresee a sudden change in trend.

 

·         Despite numerous warning indications, many traders lose control during prolonged market runs and fail to liquidate their holdings. It makes their money more vulnerable.