In Singapore, position trading is a popular strategy used to maximise profits while minimising losses. It can be used in many different markets, including stocks, futures, options and Forex.
What is Position Trading?
Position trading is a long-term trading strategy that focuses on taking trades with a higher probability of success and holding them for a more extended period. It differs from day trading, which involves taking trades that last for a few minutes or hours. Position traders usually trade stocks, commodities or currencies and use fundamental analysis to find suitable entry and exit points.
Choose the Right Market
If you want to execute a successful position trade, it’s crucial to pick the right market with low volatility and stability. Position traders usually prefer markets with less chop so their trades can have more range. Markets like the S& P 500, Dow Jones, FTSE 100 and Nikkei 225 make good choices for long term positions.
Find a Good Entry Point
Once you have found a suitable market, the second step is to pinpoint a good entry point for your trade setup. It could be either buying at support or selling at resistance. Doing this will help increase the odds of your trade being successful.
Use a Longer Timeframe
When trading positions, it’s essential to use a longer timeframe, such as the daily or weekly chart. It will give you a better idea of the overall trend in the market and help you make more informed trading decisions.
Use Fundamental Analysis
Fundamental analysis can also be helpful for position trading. By studying the company’s underlying fundamentals, you can better understand how strong it is and whether it is likely to rise or fall in price.
Choose the Right Exit Strategy
Just as important as choosing the right entry strategy is to choose the right exit strategy. It could involve setting a stop-loss order to minimise losses if the mark.
Have a Plan
When position trading, it’s crucial to have a well-defined trading plan. It should include your entry and exit strategies, as well as your risk management rules.
Have a Target Price
Once you have entered into a trade, you need to have a target price in mind. It’s the price at which you want to exit the trade, either by selling or taking profits.
Use Trailing Stops
These are stop-loss orders that adjust automatically depending on the current market conditions. It helps to protect your profits if the market moves in your favour.
Monitor your Positions Closely
It’s essential to monitor your open positions closely, especially if you are using leverage. It will help you stay aware of your risk/reward ratio and make necessary adjustments.
Have a Long-Term Perspective
Position trading is a long-term strategy, and you should not expect to make money overnight. It may take several months or even years for your trades to fruition.
One of the keys to success with position trading is to stay disciplined. It means sticking to your rules and not making rash decisions based on emotion.
Another key to success is to be patient. It means waiting for the correct trade setup to come along rather than taking trades based on hunches or gut feelings.
Use a Stop-loss Order
It’s always essential to use a stop-loss order when trading positions, as this will help protect your capital in case the market moves against you.
Review your Trades
You should also review your trades regularly. It will help you identify any mistakes you may have made and learn from them.
Have Realistic Expectations
Finally, it is essential to have realistic expectations when position trading. It means understanding that there will be times when you lose money and that you cannot expect to make a profit every time.
Position trading is a sound strategy that can achieve long-term success in the stock market. By following the critical techniques outlined above, you can significantly increase your chances of success.