Would you like to have a trading style that is easy, doesn’t take a lot of time each day, and makes higher profits than day trading? Then consider position trading.
Position Trading is a style for busy people who can’t spend every day looking at stock charts. It is also for traders who have lower capital bases, or traders who want a more conservative, very low risk type of trade. This style is not as well-known but actually outperforms swing and day trading profits by a wide margin.
The hallmark of the position trade is the platform. A platform is a tighter sideways action, wider than a consolidation but much narrower than a trading range. Platform position trading is highly lucrative and often position traders make more profits than their swing and day trading counter parts. This is because position traders tend to make profits and hold onto them rather than having the chronic make a little lose a little habits that affect many swing and day traders.
The great thing about position trading is you can buy in with the easy to learn GTC controlled order and then allow the price to execute your order. This means you don’t have to enter orders constantly or try to have the perfect timing for your entry. Buying into strength gets you into the position trade with little time and effort on your part.
Next you estimate your target gain or the number of points to a strong resistance level. That gives you your exit point and exit strategy.
And finally, you monitor the stock on a weekly basis, waiting to move up your stop loss and profit stops as the stock forms new platforms.
The ideal candidates for a position trader are stocks that are just on the verge of completing a bottom. Often stocks will move with momentum as a bottom forms, then settle into a steady slower paced platform building phase. This is a common price action in trading range, bottoming, and platform market conditions.
Below is an example of a stock that has potential for a watchlist for a position style trade. CSII is working on a long term bottom and has just moved up to the first level of bottoming resistance. Energy is good and we can see quiet accumulation with surges of volume to the upside even though price is still low and sitting mostly in a long term bottoming pattern. The surges of volume and TTQA expose quiet accumulation by larger institutions.
This very long term view shows the target run potential to be about 40 points. This is an excellent target gain for a position trade. This allows position traders to hold as the stock moves up. But it also gets you into the stock while it is still a lower priced stock.
Chart 1
The institutional percentage has been increasing during 2011 and the stock has been increasing and even though it has a mere 16 million outstanding shares, several giant funds are holding this stock.
It is also in a growing sector and industry.
The daily chart shows a short term momentum move to complete the short term bowl bottom.
As momentum subsides, the stock is likely to settle into a platform pattern that will move it up as the company has growth.
Chart 2This is a young company that once IPO’d over $100.00. Now that it is heading toward completing the IPO bottom, it has finally reached the point where position traders may want to consider it for their watchlists. It still has work to do but the set up is a good example of what a position trader looks for in a stock to trade for target gains rather than a few points in a swing trade, or a half a point for a day trade.
If you want an easier trading style, that generates great returns with less effort and work and much lower risk in our current market condition consider learning position trading.
Remember: TechniTrader® is not a stock recommendation company. We teach people how to trade stocks. That goes way beyond just stock charts, or technical analysis, or indicators. Learning to trade is a process and using the proper trading style that suits you and your goals.
Trade wisely,
Martha Stokes, C.M.T.
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
http://technitrader.com
MetaStock Partner
(c)2011 Decisions Unlimited, Inc.
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