What is a Position Trader & Position Trading? 2021 Guide

What is a Position Trader?

March 25, 2021
2 years ago

Before explaining what a Position Trader is, let's look at some important aspects. When we speak of "position" we are referring to an operation that was carried out to buy or sell a financial instrument, such as currencies, shares, raw materials, etc.

When a position is opened in the market, a trade is initiated, an asset is bought or sold. While this operation is kept open, it is in an open position and when it closes, it means that it leaves that position, and therefore, the operation is closed. The objective of this speculative process between the purchase price and the sale price is to make a profit.

Just as there are different strategies and tools to operate, there are different styles or types of traders that differ depending on the time during which they maintain their open positions in a trade, they are Scalpers, Day Traders, Swing Traders, and Position Traders, (you can read more information about the styles here.

Today we are talking about the Position Trader. The Position Trader keeps his positions open for a longer time, which can last for weeks, months, or even years, without expecting to make a small amount of profit over the short term due to market fluctuations. It is the technique called "buy and hold" (buy and wait) that aims to make the most of the long-term trends that may arise.

The Position Trader is not focused only on graphs or historical data but exhaustively analyzes the macroeconomic factors of the market to arrive at a long-term strategy. This analysis focuses on the components of the market and takes into account the internal and external variables that may raise the price, lower it or remain permanent, and how soon these are likely to occur. Myriad other factors, such as elationships between the financial statements, expansion plans futures, forecasts of income, profits, growth, sector to which the company belongs or the economic environment of the country or countries in which it operates, are also considered.

It could be said that a Position Trader is more like an investor since the objective is to obtain long-term profits, and for this reason, their interest is more focused on those markets with clear trends, as opposed to the markets that have a lot of volatility and tend to stay within quite tight price ranges.

Unlike other styles, the position trader needs to have access to a sizeable initial capital in order to obtain profits. The position trader must also have very clear risk management strategy - and establish a very wide stop-loss, since price oscillations over time can lead to unease and it's important to stay calm.

Typically the characteristics of a Position Trader are:

  • More patient, analytical, and not influenced by external situations.
  • "Cooler" mentality and less anxiety for decision making, when you win as when you lose.
  • More experienced.
  • Knows the trends and the situation of the markets in which it operates, on a political, social, and economic level.
  • Takes more risk in terms of profit and loss - over the longest time frame.
  • Usually has access to more capital than other types of traders.

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