A type of investor who takes positions aimed at long term profitability. By doing so, the Position Trader can disregard any short-term volatility in terms of price, unless, of course, they specifically alter the investor’s initial thesis.
They are considered to be the polar opposite of day traders but in terms of vision and activity within the stock market. Position traders will follow trends which is exactly what makes them differ from both the day trader as well as the buy-and-hold type of investor.
By identifying and following a trend, the position trader can identify the trend’s peak and sell accordingly, whereas the day trader will only seek out to profit from the stocks short-term fluctuation and the buy-and-hold investor will simply keep on holding passively.
Common strategies for Position Traders
A position trader will have an entry and exit point clearly identified before opening a position. Macroeconomic factors may sometimes work as guidelines for position traders as they believe them to be reflected in market trends and price patterns.
Dealing with risks in Position Trading
Risk is usually mitigated by employing stop losses. Stop losses aim to prevent position traders from finding themselves in the middle of a trend reversal.
Advantages and disadvantages of Position Traders
Little time is required in order to be a position trader but that comes with the cost of their money being tied up for a long time. Minor fluctuations won’t be of concern to position traders as they are to day traders or scalpers.
Position trading is easier during bull markets, which will often have strong, identifiable trends.
