Mastering the art of position trading strategy

Trading is a tricky business, and managing trades is an essential aspect of success. While setting entry points by placing limit orders might be simple, correctly working them and knowing when to exit is the real challenge.

Position trading is a strategy that allows an investor to maximize their profits and minimize their losses by buying and selling stocks at different times. When using this strategy, the investor holds onto shares until the price has increased or decreased sufficiently before selling.

Two types of position trades

There are two types of position trades: long and short. A long position trade occurs when an investor buys stocks at a low price to sell them for a higher price later. Meanwhile, in a short position trade, an investor borrows stock from another party and sells them, intending to buy back later at a lower value (and return what they borrowed).

Saxo Bank offers traders both types of position trades through its SaxoTraderGO mobile application. Position trading allows an investor to make gains against the market. Successfully using this strategy will require patience and strict risk management. Always remember to cut your losses short and let your winners run.

Creating price targets

One way to master the art of position trading is to create price targets for different stocks. It means that before buying shares, an investor defines when they will enter and exit a trade. It is important to note that it can be difficult to time entry and exit points because markets are often unpredictable. In addition, research shows that over 50% of retail traders do not set stop-loss points when using this strategy.

It leaves them vulnerable as it increases the chances of them losing their capital rapidly if something does go wrong in their investment and they don’t cut losses short (for example, sell after a 5% loss). Another option is to use other financial instruments like options to make gains as the prices of things you’re trading will change.

Pre-Determined Exit Levels

Staying with a good trade for the long run may be more difficult for novices. Creating a stop loss and profit-taking order before entering a position, and continuing to trade, might be more straightforward. If you’re constantly getting stopped out, examine your strategy and figure out why it isn’t working. However, if you’re patient and stick to the established guidelines, you’ll be able to determine whether or not a plan is truly effective. It’s vital to understand why the technique isn’t working and what you can do about it. You may think you have a solid strategy, but you will still fail if you close a successful trade because you want to book in the gain before it reaches the take profit level.

Trading Without Exit Levels

Experienced traders may choose to trade without any pre-determined exit levels; however, this is undoubtedly the riskier option. On the other hand, some traders may only establish a stop-loss position when starting the trade and manage it as the market evolves. This sort of trade management requires patience and expertise. It works well for scalpers in and out of positions rapidly or long-term traders who have the time to figure out how to manage their position.

Trailing Stops

Trailing stops can be effective in trending markets. While the metal is in a strong uptrend, a long Gold trader might relocate the stop-loss order upward as the price rises. The trader uses this method to guard their profits in the event of a market reversal. Traders, however, must exercise caution not to utilize this strategy in ranging markets since they would frequently be stopped out.

There is no “right” or “wrong” approach to trade, the best way to discover a good strategy is to test it out on a demo account. Impatient traders who have trouble with self-discipline may choose pre-determined exit levels. Experienced traders, on the other hand, may want to maintain their position open as the market evolves rather than setting fixed exit levels.

Leave a Reply