Everyone has a different investment style, but broadly speaking, investors usually have two options: they can focus on short-term trades to profit from price fluctuations, or concentrate on long-term investments to earn returns from trends.

The concept of a “position” is typically refers to long positions—assets you’ve actually purchased and own—whereas “position” can refer to both long and short trades. For example, if you short a stock, it’s called a short position. That said, if you’re only trading in domestic markets without access to short selling, the concept of a short position doesn’t really apply.

Position trading is essentially a medium- to long-term strategy. It’s the opposite of day trading. Position traders generally ignore short-term price movements and instead rely on in-depth fundamental analysis and long-term trends to generate profits.

What’s the Core of Position Trading?

As mentioned, there are generally two trading approaches. One is day trading, where investors buy and sell within the same day to profit from small price swings.

The alternative is position trading. The key here is having a long-term plan—holding a position until a significant price move occurs, which could take weeks or even months.

To be a position trader, you need patience. You must be able to ignore daily price noise and instead aim for substantial returns from long-term price changes.

This strategy assumes that markets move in trends. Investors who engage in position trading aim to capture these long-term price movements.

The challenge is that investors must be prepared to tolerate small losses and use stop-loss strategies to prevent larger ones.

Patience is essential. Don’t hesitate to exit if needed, but stick to the plan and aim for the profit target you set when entering the position—usually based on a percentage move in the market.

Is Position Trading Profitable?

When there’s a clear market trend—either upward or downward—it’s best to go with the flow. Position trading relies heavily on trends. However, the reality is that most markets spend more time moving sideways than trending clearly. During such times, position trading options become limited. Traders must either hold steady or stay out of the market entirely.

This means not everyone can make money with position trading. Everyone interprets trends differently. What position trading does offer is a higher probability of profit—compared to the fast in-and-out nature of day trading, the slower pace of trend-hunting may be a more effective strategy.

Is Position Trading Right for You?

To succeed in trading, it’s important to find a strategy that fits your mindset and lifestyle.

Some people can’t commit the time or energy required for long-term strategies. Job demands or family obligations may limit your ability to monitor the market closely. In that case, position trading can free you from constant market-watching.

Another advantage of position trading is the additional time you get to make decisions—unlike day or swing traders, who often work under tighter time pressure.

If you find market stress overwhelming, position trading can provide a greater sense of peace.

Pros and Cons of Position Trading

Trading strategies are designed to deliver results using the best methods for specific conditions.

But no strategy is perfect. Before committing to one, it’s important to clearly understand its benefits and drawbacks.

Advantages of Position Trading:

  • Reduced stress: Unlike short-term traders, you don’t need to monitor your positions constantly.
  • Potential for large profits: Long-term strategies can yield significant gains.
  • Efficient time management: You can allocate more time to other trades or business activities since you only need to analyze potential assets occasionally.

Disadvantages of Position Trading:

  • Requires substantial capital: Small investments may not be feasible. Sharp price movements could wipe out your capital.
  • Capital gets tied up: Since positions are held for long periods, a lot of money remains locked in.
  • Costs may increase: Holding positions too long can incur additional fees.
  • While less risky than day or swing trading, position trading mistakes can be costlier. Going against the trend can result in financial loss and wasted time.

The Importance of Support and Resistance Levels

Position traders can benefit from support and resistance levels. These help assess whether a price is more likely to drop in a downtrend or rise in an uptrend.

Based on this analysis, investors can decide when to open or close a position in an asset.

Support/resistance strategies help traders interpret chart patterns—a useful skill when holding long-term positions.

Short-term support levels may emerge, while historical support levels can last for years.

Resistance levels indicate price points that an asset struggles to break through.

Position traders may monitor long-term resistance levels and close positions once those are reached, expecting a drop in price.

Similarly, traders might buy at historical support levels if they anticipate a long-term upward trend.

Markets Suitable for Position Trading

A major advantage of position trading is that it can be applied across various markets with minimal adjustments.

Stock Market
The go-to choice for position traders. Retail investors often seek annual returns without constantly watching the market or tweaking strategies.

Stocks are great for theme-based investing. For example, government policies may favor certain companies, increasing their profits in the coming year.

Commodity Futures
Commodity prices are influenced by supply and demand. For professional trend followers (like CTAs), this is the preferred asset class.

When supply and demand are balanced, external factors like droughts can disrupt the market and create sustained trends.

Forex Market
Forex trading is usually associated with short-term strategies. Traders often make daily or swing trades due to the cost of holding positions overnight.

However, because the forex market is highly active, there’s a steady stream of new economic and political events, offering many trading opportunities.

While many investors opt for short-term trades to manage forex volatility, the market also presents opportunities for medium-term position trades.

Index CFDs
Indexes represent a basket of stocks, making them more stable and reactive to macroeconomic factors rather than micro-level changes like a CEO resignation.

If you spot a bull market and want in on the trend, or anticipate a bear market and want to short the index, you can use index CFDs within a position trading strategy.

How Risky is Position Trading?

At first glance, position trading might seem easier and safer than short-term trading.

Generally, the shorter the trading timeframe, the higher the risk—due to market volatility and sudden events that leave little time for response.

Long-term investments tend to evolve more slowly with fewer surprises. However, some events can still negatively impact long-term positions and lead to rapid losses.