Positional trading in the stock market. What is the difference between positional trading and how to apply it

One of the popular methods is positional Forex trading. Choosing a strategy is a priority for the participant exchange trading.

The tactics of behavior of traders on the exchange are determined by individual preferences, taking into account financial capacity, psychological characteristics, trading experience, type of financial market (currency, stock). To settle on an acceptable option, the trader “rolls around” various schemes. The time spent on such searches pays off in assets earned by competent actions according to a pre-planned plan. Positional trading has its own characteristics and is not suitable for everyone.

What is the essence of positional trading

Determining the direction of the main trend, in the long term, and placing a small number of orders "along the trend", in order to obtain the maximum profit - the principle of the positional trader. Successful trading using the positional method is only possible for investors who:

• have significant financial resource(The "airbag" should protect against corrective fluctuations in a long-term trend);
• are well versed in macroeconomic indicators;
• make up a forecast based on long-term analysis of market fluctuations;
• use a combinational analytical method, where the conclusions of fundamental analysis prevail (indicators are considered as confirmation signals);
• have psychological stability and are not subject to the opinions of the "crowd";
• do not need instant profits and are aimed at making profits in the long term.

Mostly, positional trading is suitable for large investors who can “watch the production” for years.

Risks and benefits of the method

The advantages include the absence of problems inherent in "day trading":

• "Binding" to the monitor;
• a huge number of transactions;
• dependence on the news stream;
• "Chaos" on intraday charts.

Disadvantages:

• development of new trading strategies is complicated by a long period of transactions;
• in order to avoid "market misunderstandings" it is necessary to significantly remove "stop orders";
• there is a risk of unforeseen circumstances that could "knock down" the long-term trend.

A trading system based on the positional trading method requires mastering a significant amount of specialized knowledge. Trading courses and books on trading will help you avoid "childhood mistakes." Financial markets trading and the rules for working on them are detailed and accessible in the books of Dr. A. Elder: "Encyclopedia of stock trading" and "How to play and win on the stock exchange." Training material for the positional trading course is freely available on the Internet - on the video of most Russian stock brokers.

Strategic Foundations of the Positional Method

Planning entry points, exit points and risk management is a key task for a trader. The solutions lie in the use of technical analysis tools and competent "money management".

The danger of a reversal of the main trend, before reaching the peak values, can significantly affect the deposit without stop-losses or with stops set at a large number of points. An experienced trader monitors the "course" of the trend and quickly reacts to signals that notify of a change in trends. An example of technical analysis could be a breakout key levels support or resistance (by channels, Fibonacci levels or other instruments), the formation of "reversal" patterns, violation of the "wave pattern", etc.

How to learn positional trading without exposing yourself to a high degree of risk? Professionals recommend working out the strategy on medium-term timeframes that do not require significant capital investments and holding open positions until the end of the global trend. Long-term position trading for beginners is directly contraindicated.

3-screen method

Elder trading (Dr. Alexander Elder is the author of the method) is based on the analysis of price dynamics at different time intervals. Screens can be selected for different styles - for long-term trading they choose H1, D1, W1, and for medium-term - M5, M30, H4. The higher timeframe is decisive when choosing the direction of the trend. Using such a strategy helps to accurately find entry and exit points (in addition, various indicators and oscillators are used).

Tips for Practicing Positioning Traders

• to withstand corrective drawdowns, the leverage should not exceed 1:10 .;
• when managing capital, do not pledge the risk of more than 1-2% of the deposit;
• the level of "stop-losses", which allows to optimize risks - 300-400 points;
• patience and confidence in the forecast will make it possible to take the maximum profit along the trend.

A factor influencing any strategy

The psychology of trading is assessed by professionals as a component that takes 90% of successful activity stock trader... Fear of losing money, lack of confidence in the correctness of the chosen method, gambler's excitement, desire to earn a lot at once are the main psychological "diseases" that a trader must fight with.

Famous millionaire traders are Williams, Elder, Borselino, June and others. Psychiatrists by education. Not economists and mathematicians, but psychiatrists and psychotherapists make the most significant success in stock trading.

Conclusion

The positional trading style is conservative and does not provide high-speed super profits, which are achieved with day trading. However, the risks are also different - fleeting decisions made during intraday transactions, put a lot of emotional pressure on the trader and lead to numerous mistakes, often with fatal consequences.

Positional trading is trend trading on long time frames. Positional trading is usually carried out on a basis. Almost all exchanges use this method of trading. Traders using this trading style keep both sell and buy deals open for a long time.

Sell ​​trades are profitable when the asset depreciates, which usually occurs during times of economic / financial turmoil. This way of making money brought many speculators considerable profits in 2008, when sharp drop quotes.

Features of positional trading

The essence of positional trading is to open trades in order to maximize profit from a trend. Positional traders are oblivious to minor price spikes and market noise. They try to find the main trend, the duration of which may exceed several months. This method of trading has its advantages. The main one is that a trader does not need to constantly be in front of a computer monitor to trade in this way. It is enough for a trader to carry out the analysis correctly, make a forecast for the future and open deals. Further, the trader simply observes the deals and corrects them if necessary. At the same time, the trader does not pay attention to market noises and minor pullbacks, so there is no need to constantly monitor orders.

Positional trading is the exact opposite of where the trader needs to be actively involved in the trade. There is also another style of trading - swing trading, which involves opening orders once a week or month. Positional traders create a couple of orders per year. Swing traders create up to one hundred trades per year. As for day traders, they create about 1000 trades per year.

How is the identification of places to enter the market carried out?

There are several methods for identifying suitable places to enter the market in positional trading. Some speculators are looking for assets with good trending potential, but which are still fluctuating within a certain corridor. Sometimes you can open deals on assets on which a trend has already originated. The second case is more convenient for traders, since the trend has already appeared and its direction is known. All that is required of the trader is simply to open an order in the direction of the trend. In this case, you do not need to spend special time and effort on analysis and forecasting. The main goal of a positional trader is to identify an emerging trend and open an order in accordance with its direction.

Positional trading does not imply trading during a flat and taking into account corrections, in addition to those situations when trades are carried out in a wide corridor for a couple of years. In such situations price level can change from one edge of the channel to the other over the course of a couple of years and such a movement can be classified as a trend movement, which is perfect for positional trading.

Trends tend to emerge from a breakout of important levels or patterns. Some position traders use a variety of indicators in trading. Such tools allow you to identify an already incipient trend, since they are a little late in the readings.

Some position traders use stock analysis with a 40-week moving average to identify a point to enter the market. In this way, a trader can identify which securities are already rising in price or falling in price. Some speculators use several tools at once to identify suitable points for opening orders. The use of a pair of moving averages with different periods at once makes it much more accurate to find suitable points for opening orders.

Basic positional trading strategy

Despite the fact that positional trading involves opening deals for a long time, traders still need to follow certain rules in order to make good money. Traders must correctly find the entry and exit points of the market, as well as manage risks.

In the role of the main strategy for conducting positional trading securities you can consider the intersection of the price level 200 daily moving average. After this happens, you can open orders. If the price level crosses the moving average from the bottom up, it is recommended to open a buy trade. If the price level crosses the moving average from top to bottom, it is recommended to open a sell trade. It is easy to enter the market, but it is also important to get out of the market on time. There are two ways to exit the market. The first one involves closing deals manually, the second one - by placing stop orders. It is recommended to set stop orders at a distance of 5% from the moving average. If you are not a fan of opening stops, the trade can be closed in the event of the opposite intersection of the price and the moving average.

Positional trading risks

Positional trading, like any other type of trading on foreign exchange market is subject to certain risks. Among the main risks associated with this trading methodology, it is worth noting the danger of a trend reversal before the created orders are closed. In unfavorable circumstances, even weak corrections can cause a trend change.

Also, positional trading has some limitations caused by the fact that traders invest their capital for a fairly long time period. For this reason, before creating an order, a trader must plan his investments in such a way as to exclude an exit from a position due to a drawdown of the deposit.

The advantages of positional trading

Among the many advantages of positional trading, the following deserve special attention:

1. This method of trading allows you to determine the true situation in the market, which, in turn, helps to identify the true direction of the price level movement. Due to the fact that the trader is not distracted by small price fluctuations, he makes significantly fewer mistakes.
2. The ability to apply fundamental analysis. Having familiarized himself with the situation in the economy of a particular state, he will be able to fairly accurately predict the change in the quotes of the national currency.
3. Positional trading implies a more measured and calm trading, as there is no need to make quick decisions. After opening orders, the trader only needs to monitor the market situation from time to time.

Should I use positional trading?

In order to receive good income when conducting positional trading, you need to have a certain sum of money... With a small initial capital, a trader cannot count on serious income. And the recommendations of money management are somewhat different here. Stop-loss, in connection with the work on the older time periods, is set a little further. Therefore, if a trader violates the recommendations for capital management and invests most of the initial capital in a position, then Stop-Loss will not save him from losses if the price level starts moving in a direction that is unfavorable for the trader. And this can happen at any time. The size of the correction or sideways movement can be equal to 500 pips on pairs with high volatility. At first, it is recommended to start with a small deposit so that the trader can understand whether he will be able to trade in such conditions. Not every trader will be able to keep an order open for several months, let alone years. During testing, you can continue to trade intraday and sometimes test your trades in position trading. This method will help the trader understand for himself whether positional trading is suitable for him.

If you cannot boast of having a large volume of free Money, then positional trading will most likely not suit you, since it is impossible to quickly accelerate a small deposit with its help.

Positional trading is the best choice for patient traders who are not chasing short-term income and can afford to invest in trading for a relatively long time.

Many exchange traders prefer to trade long term. It is convenient: less time is spent on transactions, there is no need to sit at the monitor, the profit can be significant - more than in intraday trading or scalping.

Trading on fluctuations with a duration of 2-3 days or Swing trading- a common tactic and is suitable for those who do not have time to be in front of the monitor during active hours of the trading session, and who, nevertheless, wants to profit from sharp price movements in both directions(as opposed to long term strategies).

The essence of swing trading

Since swing trading is associated with carrying a position to the next day, it may seem like an exit rather than an entry tactic. Indeed, for some deals, intraday traders manage to find such successful entries that they can be carried over to the next day, resulting in a profit / risk ratio of more than 10/1. But on average, the swing trader will work with wider stops and not focus on fast moves... It will be absolutely normal for him to enter a position and stay in it for 2-3 days until the price movement finally takes place.

Where swing traders trade

Psychologically, this is a more comfortable style for those who do not want to work with short feet and large shoulders. But there is a caveat: the number of trading opportunities for a swing trader is limited... For those who work in the foreign exchange market, for example, there is also the effect of the correlation of instruments. It may turn out that almost all instruments will be locked in ranges for several weeks and the best deal in this case would be to be out of the market (no positions).

Therefore, swing traders often choose markets with a broad level for example, the American stock market. From the whole variety of instruments (there are several thousand of them) there you can always choose assets that are in a strong trend, ready for a breakout of a large range, or that are close strong levels support / resistance. If the S & P500 or Russell2000 index rises, many issuers (stocks) can show good buy signals, including using conventional technical analysis.

How does a swing trader trade?

If an intraday trader monitors the external background and how the market reacts to news, then the swing trader is already paying attention to long-term trends: are there signs of a large capital inflow, is there an increase in volume / open interest, etc.

When a trader rolls over a position to the next day, it is important for him to synchronize with the main driving forces of the market and have a “big player” behind him. Therefore, preparation is very important for successful trading in this style. Execution tactics, on the contrary, can be quite simple and fit into several candlestick patterns on the H4 chart.

Long-term trading with a duration of 3-6 months is called positional trading.

The nuances of positional trading

At first glance, it may seem that the longer-term approach, the less profitable it is - compare the average scalper turnover and the positional trader's turnover. In fact, position trading has highest potential for profit among all the listed trading styles, and here's why.

• First, a trader holding a position in the direction of a strong trend allows the market to do all the work and saves himself from mistakes, wrong entries, missed trades, etc.
• Second, by building up profitable positions (adding volume to a position as it moves into profit), a trader can achieve non-linear growth in profit.

Positional trading was used even on the first stock exchanges, when quotes were manually updated two or three times a day. This type of trading does not lose its relevance in the conditions of modern active trading. What is positional trading, how it works, what advantages it gives a speculator - these are important questions that a trader needs to get answers to before starting work.

What is positional trading?

Positional trading is trading with a trend over a long time frame. For a trader, it is the trend that is important here, and not short-term price fluctuations or rate corrections. This strategy allows you to make money even during periods of trading and index crashes.

You can apply the positional style on any exchange and for any type of assets, including Forex. At the same time, the trader is guided not by news that affect rate fluctuations, but by the trend itself. And for this, methods of fundamental analysis and technical forecasting of the market are used. A trader needs to find a point of entry into the market - this is either a trend that has already begun, which should show the desired development, or assets that can show a good trend, but have not yet gone beyond a certain range.

There are two rules for conducting positional trading:

• the entrance is carried out when in a large time interval, not less than one day, or even a week, a certain trend begins;
• the end of the trend leads to an exit, about which there should be indisputable signals.

Thus, trades remain open from several days to a year or several years - it all depends on the trend and the trader's capabilities.

Of all types of trading, it is positional that is most like an investment - the meaning of these processes can be described by the saying “buy and hold”. But for all the similarities, positional trading has many differences from investing and from other trading styles.

Difference of positional trading from investments and other types of trading

The peculiarities of positional trading make it more than other types of trading. But this is not an investment.

Positional trading is distinguished from other trading schemes - scalping, intraday, swing - by the following moments:

• long period of holding a position - if other traders open from 100 to 1000 deals per year, then a position trader can make 2-5 deals;
• the trader is guided by the trend, and not by fluctuations in the price of an asset;
• application of deep fundamental analysis, while in other types only technical analysis is used.

Positional trading differs from investments:

• the main goal - the investor seeks to collect a portfolio of investments and receive profit from equity participation, dividends. The trader's goal is to sell more profitably than he bought;
• a different approach to analysis - the trader is guided by the chart of changes in the price of shares and only when making a final decision looks at the state of the company, while the investor thoroughly studies the activities of the company, its reports and financial condition and only at the final stage turns to the graph of changes in asset prices;
• the timing of holding a position - of all types of trading, the positional is the most "long-playing" - the results are usually summed up within a year. For an investor, a year is a rather short period, and it can wait for its goal for several decades.

It turns out that positional trading is in the middle between classic short-term trading and investments, but still pursues the goal of selling at a higher price than buying.

Who is positional trading for?

At first glance, positional trading is more interesting and easier - I chose an asset, bought a share and check the quotes once a week. You do not need to sit in front of the monitor all day, tracking quotes and news that can change the stock price. But this is only a first glance.

In fact, this is a job for experienced traders who understand the life of the market and the peculiarities of the trend movement. It is easier for beginners to earn their first experience and learn how to work on stock exchange on short-term transactions within one to two days.

It is worth doing positional trading if the trader has:

• sufficient capital to maintain open transactions - otherwise it will not be possible to comply with the rules of money management in the event of a drawdown;
• the desire to work for the future and the ability to wait for the result for a long time;
• the ability to conduct a thorough analysis.

That is, an ideal trader is a phlegmatic, decisive person with experience in stock market within 2-3 years at least and with a sufficient deposit.

The benefits of positional trading

The advantages of positional trading include:

• a greater number of successful deals, in comparison with other types of trading, due to the work on the trend and difficulties with market manipulation;
• to track positions and check the status of quotes, you need to spend much less time at the computer;
• low psychological pressure of situations;
• there is an opportunity for leisurely decision-making and analysis;
• the possibility of obtaining higher profits due to long-term holding of positions.

But there is always the other side of the coin.

The risks and disadvantages of positional trading include:

• a long time to get the result;
• the need to correctly calculate the size of the investment;
• the sudden end of the trend, up to the planned maximum;
• the need for in-depth analysis - the cost of the error will not be visible immediately and, as a result, a decent amount of time will pass.

Positional trading is an excellent opportunity for experienced players to make money on the trend, for them it is a chance to show all their accumulated experience and knowledge of the market. Beginners should work on shorter-term trades. More useful information you can receive about trading by subscribing to the blog. A gift from the School of Trading to all new subscribers: 12 lessons for novice traders!

Position trader- a market participant using trading strategies, the time interval of which is from several days to several years.

In various sources, positional traders are divided into medium-term (long-term) traders and long-term "birds" - investors.

Let's consider how these market participants differ:

1. mid-term trader... The deals of these market participants last from 3 - 4 days to 2 - 3 weeks (sometimes a month). Their profit is based on trends that are displayed on the H1, H4 and D1 charts;
2. short-term investor... Such mid-term traders consider their positions from 1 - 1.5 weeks to 3 - 4 months. Their graphs are W1-W2;
3. long-term investor... A positional trader of this level works with time intervals from 1 - 2 months to several years. They look at MN level charts.

The position trader uses primarily fundamental analysis in his strategy. It takes into account the economic (statistical) data and the political situation in the countries, the currency or stocks of which it is considering for its trade. Technical analysis positional traders rarely use it, but they try not to completely abandon it.

Positional trading has its pros and cons.

Advantages:

• Positional trading does not require spending a lot of time on the computer... Unlike day trading, it is enough to study the market situation once or twice a day in order to make a decision about entering the market or being out of the market.
• The influence of the psychological factor in trading. The position trader experiences much less moral stress associated with trading on the exchange.
• The influence of daily news price fluctuations is practically not taken into account position traders, since the size of these fluctuations does not greatly affect the goals of long-term strategies.

Disadvantages:

• The length of the long-term investing activity does not allow to quickly collect enough statistical data to test new trading strategies.
• The longer a trade is open, the harder it is to take changes into account. taking place in the world. These changes can greatly affect the outcome of long-term transactions.
• Very large stop orders that can reach several hundred points.

Fig. 1 Example of a mid-term transaction.

Using signals trading system to open and close deals, you can achieve good results in trading.

To use a positional trading system, you need:

1. Be independent from the opinions of most traders. Have your own vision of the development of the situation in the market or stock exchange.
2. To be well versed in fundamental analysis (economics, politics) of the instrument with which the position trader works.
3. Have sufficient composure, patience, and calmness.
4. One of the important conditions is that the position trader must have a decent amount of money in order to withstand a possible drawdown of several hundred points.

If you use the opinion of others to trade without own analysis market situation, if you are impatient, you do not big capital, You want to make a profit faster, it doesn't matter to you what economic and political situation develops in the countries with which currencies and shares you work - then positional trading is not suitable for you.