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 trades, 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 near strong support / resistance levels. 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. On the contrary, execution tactics 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.

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:

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;
short-term investor... Such mid-term traders consider their positions from 1 - 1.5 weeks to 3 - 4 months. Their graphs are W1-W2;
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. Positional traders rarely use technical analysis, but they try not to abandon it completely.

Positional trading has its pros and cons.

Advantages:

Positional trading does not require spending a lot of time at 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 from the trading system to open and close deals, you can achieve good results in trading.

To use a positional trading system, you need:

Be independent from the opinions of most traders. Have your own vision of the development of the situation in the market or stock exchange.
To be well versed in fundamental analysis (economics, politics) of the instrument with which the position trader works.
Have sufficient composure, patience, and calmness.
One of the important conditions is that a positional 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 for trading without your own analysis of the market situation, if you are impatient, you do not have a lot of capital, you want to make a profit faster, it does not matter to you what the economic and political situation develops in the countries with which currencies and stocks you work - then positional trading is not suitable for you.

Stock trading

Good day, dear readers of the trading blog. Today in this post we will continue to look at different trading styles. If the previous article - what is my trading style part 1- concerned more discipline, then today's one relates to your goals and prejudices.

Each trading strategy is individual, taking into account the trader's free time, his monetary goals, attitude to risks, and more. But not the fact that your swing trading strategy will suit another. There are so many traders and trading systems. Read the rest of this post and find out the features and characteristics of different trading styles. Spend some time testing and defining your trading style and never change it again.

Basically, there are four styles of trading, which we will consider next:

Scalping
Day trading
Swing trading
Positional trading

This is a subset of day trading. But I highlight it separately, since scalping has its own characteristics.

Scalping Is like drag racing in the racing world. Very fast, short, emotionally stressful and, as a rule, professionals are engaged in it. Their trades can last for seconds, and a long position will immediately change to a short one. Trading this style requires lightning-fast reaction, quick decision-making and action without hesitation.

Once I heard an interesting and informative story about a scalper trader. The guy was trading when his wife slipped and fell. She began to call him for help, as she could not get up on her own and suffered from terrible pain (a fracture was diagnosed in the hospital). But the scalper husband asked to wait, as he was busy with an open position that he could not leave. Like this. The scalper should not be distracted during the trading session.

Now I will give you a piece of advice - scalping 100% is not for beginners. And not even for the seasoned. This style is practiced well capitalized professionals with good health and a balanced but fast temperament. If during the bidding, your mouse cursor sometimes does not hit the desired icon, button, or there are difficulties with double-clicking, if you notice that you are watching TV or are distracted by a crying child, then you will never become a scalper. This is a very difficult profession and hellish work.

Day trading

This is intraday trading, that is, a position is opened and closed during one trading session. Let's immediately determine the clear advantages and possible disadvantages of this style.

So the pros:

Comparing with a scalper, the day trader sleeps better !!! Less risk and emotional stress, trading several hours a day;
Greater leverage or margin;
Pure techies, that is, they do not bother with fundamental analysis of companies;
Don't worry about bad news in between trades.

Possible disadvantages. Why possible? Because with the right approach, they can be avoided:

Risks. Remember: the greater the possible profit, the greater the risk. This applies to increased leverage or margin;
Good capitalization - at least $ 25,000 ... The day trader has increased costs for commissions, exchange fees, analytics, etc., as he often trades;
High level of trading skill. Especially technical analysis skills.
Should be considered as the main job.

Swing trading

This is the style that I trade. For me, there is one main difference from day trading here - it's time. I have more of it. Swing traders also hold positions for several weeks sometimes. A money invested in an asset for a longer time, bring more profit... For example, a day trader opened a position at the bottom of the trend and closed it at the end of the session. But this does not mean that the trend is over.

Time is the main trump card for both the trader and his money.... What are the disadvantages of this style? For me personally, if a person does not know how to wait, cannot tear himself away from the monitor, transferring the overnight position, then the road to swing trading is for him while closed. You need to develop patience in yourself. It will bear fruit for you not only in the field of trading.

Positional trading

I don't want to dwell here much. It seems to me that everything is clear. The position is held for months; perfectly while the trend continues... That is, all intermediate rollbacks and corrections are swallowed. In other words, if you see yourself as a positional trader, then a fluctuation in profit of 10-15% should not cause you emotional excitement. A fairly large drawdown in the trading account is possible.

In general, if we take stock, then we can conclude that every trading style is profitable if done smartly. As I said earlier in this post, you should go beyond your goals, tasks, workload, experience in trading and others. Remember the main postulates:

The greater the possible profit, the higher the risk;
The longer you hold the position, the less noticeable your technical errors are. For example, if the scalper buys 1-2 cents higher than expected, then this is a problem; this is normal for a swing trader.

One more tip. Spend a month defining your trading style... Next, write your results into your trading plan. If this is not done, then you run the risk of jumping from one trading strategy to another, without finding your place in the market.

Secrets of the trading professionals. Methods Used by Professionals to Play Successfully in the Financial Markets Burujian Jack

Positional traders

Their energy level is almost zero. They enter a passive position and then sit and stare at it. The rules they follow are simple, and beginners quickly become aware of them: “don't add to a losing position, add only to a winning one,” “don't build up losses,” “let your profits grow.” There is nothing difficult to understand here, these rules are known to anyone whose life plans include becoming a futures trader. Another thing is that only a few of the millions of people trading around the world will become real traders. Many position traders will tell you that winning positions are much more difficult to manage than losing ones. It is not so difficult to know when to exit a losing position by limiting the risk to a certain level, while a winning position contains some element of uncertainty.

The best position traders never enter the market without realizing exactly what they expect from a trade. Disciplined investors understand that placing stop loss orders is an important part of effective money management, but when an open position is in positive territory, and more importantly, when they open new positions in addition to existing ones, a new situation arises in terms of risk norms. management. It is difficult for novice traders to learn all these subtleties, because the simplest thing is to open a position and hold it. It is much more difficult to achieve stability of results when the opened positions turn out to be profitable over and over again.

Steve Helms is one of the best position traders in the Chicago markets. A North Carolina native, Helms came to Chicago after graduating from Davidson University with the intention of establishing himself in the commodity trading world he was involved with back in his home state. Upon arrival, he had rather modest funds, but quickly went up the hill, becoming one of the best positional traders in agricultural futures on CME. Although Helms later moved to the S & P 500 futures area, he always had several open positions in different markets at the same time. Helms became an excellent trader because of his ability to emotionally detach himself from trading.

I spent many hours talking with him, but I never managed to catch his eye. Helms' eyes were constantly wandering along the quotation lines on the Quatron scoreboard. Helms' strength as a trader lay in deep knowledge of the market and patience, coupled with the intuition of the player. After opening a position, traders can no longer look at the market with the eyes of an outside observer. They have opinions, they formed them on the basis of analysis and, more importantly, they decided to test the effectiveness of the opinion by putting money on it.

The difference between Helms and other successful positional traders from the general mass is that, having opened a position after carefully performed preparatory work, they remain as objective in relation to the market as it is generally possible for a person. It is not only a matter of developing a methodology based on a combination of technical analysis and fundamental factors - it requires an intuitive understanding of the market. Many position traders, having developed a digestible trading plan that takes into account technical factors and the corresponding fundamentals, still refuse to implement it, because intuition does not allow them to do it. All successful traders will tell you that they prefer to refrain from obviously promising trades if they feel some kind of threat on an intuitive level.

Going back to Bing's saying that it is better to leave the brain at home when scalping, I can say that the opposite is true for a positional trader. Your brains are working at full strength when a position is open. Falling asleep while driving, you risk getting into an accident. Many good position traders have told me that after returning home, they continue to track prices on a computer. They listen to the early morning television business news and watch developments in overseas markets while we all sleep. They watch for news that can change the course of events in the market.

A good example is the speech by former Fed Chairman Alan Greenspan, in which he referred to “irrational exuberance”. At the time of the speech, real euphoria reigned in the markets, bulls ruled the show, bears were nowhere to be seen, and the authorities' monetary policy looked convincing. In short, the market was not ready for such words. Chairman Greenspan may have been right in his long-term assessment of the situation, but the warning was too early. We saw the market react down instantly, but the failure was short-lived. The market immediately turned around, after which we witnessed a bullish dash on a truly grand scale. A four-year rally lifted the S&P 500 and NASDAQ 100 to all-time highs. The position trader who had tracked the reaction to "reckless excitement" realized that certain far-reaching conclusions could be drawn from the market reaction. The truth was that the market didn't want to go down. This should have been a clear warning to anyone looking to sell. The best traders have understood everything: when the Fed chairman tells you that stocks are slightly overvalued, after which the market still goes up, the bears should not stick their heads out! Many astute traders made their fortunes over the next two to three years because they anticipated an unprecedented period of growth in corporate earnings as a result of the Y2K phenomenon.

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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 prices plummeted in many markets.

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, the 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 conducting 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 in securities, we can consider the crossing of the 200-day moving average by the price level. 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 in the 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:

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.
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.
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 get a good income when conducting positional trading, you need to have a certain amount 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 amount of free money, then positional trading will most likely not suit you, since it is impossible to quickly overclock 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.