Understanding Position Trading

Are you a crypto trader who wants to make a lot of money but is too busy to do so? You are not on your own.

Many new traders cannot leave their studies, day jobs, or businesses to sit in front of a computer all day; if this describes you, position trading is for you.

What is the definition of position trading? Position trading is a type of trading strategy that tries to ride the market trend and avoid being stopped out by a pullback.

This concept is also known as a long-term trading technique because it works well with higher time frames. It is not as hectic as other trading tactics, such as day trading and swing trading.

Some traders cannot afford the highs and lows of the day and swing trading, so they opt to purchase and hold.

Even if you only have 30 minutes to look at the market, it is sufficient for position trading. You have got more essential things to accomplish. It is appropriate for folks who have a job.

Furthermore, position trading applies to all markets and can be used for both long and short positions.

A winning deal, like any other imperfect strategy, can turn into a lost trade. That happens all the time.

How do you enter a position trading trade? The majority of individuals desire to know the answer to this question.

They want to know the best time to enter crypto trading. Try trading yourself, while relying on 24/7 support by traders on Bitcoin Superstar.

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Support and resistance is undoubtedly the optimum entry point in any trading strategy. The buy-low-sell-high occurs in the area of support and resistance.

At the support level, there is buying pressure, while at the resistance level, there is selling pressure. That is why the market or trading ranges are drifting laterally.

Trading ranges in an upswing market could be transitory before the market resumes its upward trajectory. The support level is the greatest location for us to start.

Trade Breakout

Let us talk about a breakout. According to Investopedia, a breakout is a stock price rising outside of designated support or resistance levels with increasing volume.

From trading ranges to trending markets, from trending markets to trading ranges, the market trend is continually changing.

Because the market is cyclical, this happens. Be on the lookout for a breakout if you find a market that has long been at the trading range level for a long time.

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When a breakout occurs, market sentiment shifts. It could lead to a severe one. The calm before the storm, as they say.

What is causing this? Swing traders and day traders are the most common players when the market is in trading ranges.

They purchase low and sell high, taking a short position and profiting modestly.

However, once there is a breakout of the support or resistance level, the market attitude shifts as new traders enter the market.

Breakout traders, trend followers, and position traders all play a role in the market. Assume the breakout is an upward trend.

Short position traders will be stopped out at the resistance level. There will be a temporary squeeze here, which will increase the purchasing push.

This condition would eventually result in a strong uptrend momentum. It is usual to see a retracement or pullback after a breakout.

Waiting for a pullback after a breakout is one of the best methods to enter a position. Why? We will know if this is a legitimate breakout or a false breakout at this time.

To claim that the pullback is genuine and we can enter a position, it must not reach or exceed the swing low.

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Position Trading Methodology

Now we know how to get into the trade. Let us see how we can exit the trade. What is the position trading methodology?

We need to keep track of the trends. We will try to stay as close to the trend as feasible. That is not to say we will not use a stop loss to avoid being stopped out when riding a trend.

No! Stop losses are essential in any trading strategy for position traders, especially since they do not monitor the market every minute.

In position trading, we will not use a tight stop loss. That will be a huge mistake. What we need is a wider stop.

A tight stop loss is only applicable for short-term trading but not for long-term trading.

You may be correct in your market assumptions, but you are getting stopped out before the market trends due to your tight stop loss.

Where should a stop loss be placed? We put it in a place where your trading setup can be invalidated.

For example, you initiate a trade at the support level expecting the price to rise; instead, the price rises little before retracing and breaking the support level.

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Your stop-loss must be below the level of support. It means your setup is invalidated if it gets hit and stopped out. The odds are stacked against you.

But what if you were shut out of the market before it began to trend? It signifies that your prediction of an uptrend in the market is right.

That was the reason why you were stopped out. We are not going to be able to escape getting kicked out of the market.

However, the easiest way to avoid it is to give your stop loss more breathing room.

Put a buffer below the support level, but not just any buffer. Allow adequate space to avoid being stopped out too soon.

You should employ a trailing stop if you want to ride large trends and make massive profits. It will keep your winning position from turning into a losing one.

Let’s pretend you’re using a stop loss, and you’re letting your profit run. You, on the other hand, simply follow the market’s lead.

Then, without your knowledge, the market trend shifted. You believed it was only a blip on the radar and that it would soon trend again.

However, it returns to your entry point, and you are quickly kicked out. It had the potential to be a profitable trade, but it ended up being a loser.

However, if you had utilised a trailing stop, you would have made a profit even if you were stopped out. We don’t have a target profit at the trailing stop, so we will just ride the market.

Many novice traders consider consulting experienced crypto traders to decrease the chance of such unfavourable consequences. This is not financial advice to please do your own research.

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Avatar of Jonathon Spire
My diverse background started with my computer science degree, and later progressed to building laptops and accessories.And now, for the last 8 years, I have been a social media marketing specialist and business growth consultant.In my spare time I dabble in crypto and various types of automation.
Jonathon Spire

Jonathon Spire

Tech Blogger at Jonathon Spire

My diverse background started with my computer science degree, and later progressed to building laptops and accessories. And now, for the last 7 years, I have been a social media marketing specialist and business growth consultant.

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Jonathon Spire

I blog about a range of tech topics.

For the last 7 years I have been a social media marketing specialist and business growth consultant, so I write about those the most.

Full transparency: I do review a lot of services and I try to do it as objectively as possible; I give honest feedback and only promote services I believe truly work (for which I may or may not receive a commission) – if you are a service owner and you think I have made a mistake then please let me know in the comments section.

– Jon