What is position trading and how does it work?
Position trading involves keeping a trade open for a long period of time. With position trading, you’ll be more concerned with price movements over weeks, months or years compared to price movements in the short term, such as intraday.
Position trading can refer to either speculating on prices with financial derivatives or investing. Speculating on price with financial derivatives means you’ll be taking a position with CFDs or spread bets. These products let you open a position without taking ownership of the asset, which enables you to speculate on prices rising by going long, as well as on prices falling by going short.
Investing means that you’ll be buying an asset outright, which will grant you ownership of it and you’ll benefit from any increases in its price. When talking about ‘position trading’ in a general sense, many people are actually talking about long-term investments. These can include shares, bonds, funds or other assets that are held for a long time.
In the context of position trading, long trades or investments are often the go-to, but if you’re expecting an asset to fall in value over a weekly, monthly or yearly time frame, you could also open a short trade to profit from prolonged bearish market sentiment.
To be a successful position trader, you’ll need to use a mix of fundamental analysis and technical analysis to evaluate potential market trends and risks before opening a trade or investing.
