What is position trading and how does it work?
Position trading involves keeping a position open for a long period of time. As a result, a position trader is less concerned with short-term market fluctuations, and usually holds a position for weeks, months or years.
Position trading can refer to either speculating on price or investing. Investing is the most common form of position trading, with many position traders having long-term investments in share portfolios, funds or pension plans. However, investing is limited to going long, while position trading with CFDs can also involve going short.
Often, position traders use fundamental analysis and technical analysis to evaluate potential market trends and risks before opening a position. The strategies below can be used by position traders to analyse price charts and make predictions about market movements.
Support and resistance trading strategy
Support and resistance levels help position traders recognise when an asset’s price movement is more likely to fall into a downward trend or increase into an upward trend. Based on their assessment, position traders can decide whether to open or close their position on a particular asset.
A support level is the price an asset will not usually fall below, as buyers tend to purchase the asset at this level. Conversely, the resistance level is the point at which the price of an asset ceases to rise. In this scenario, traders may choose to close their position and take the profit instead of maintaining their position, only for the price to fall.