Position trading is a popular and widely used investment technique that allows traders and investors to hold their positions open overnight or for several days up until a week. This technique aims either to take advantage of significant price movements or to implement market timing strategies rather than day trading, where traders close their positions every day. Visit this site for more information.
There are two main types of position trades: long trades and short trades. Long trades benefit from an increase in value, whereas short trades benefit from a decrease in value. This article provides an overview of financial instruments commonly used by Australian traders who engage in these types of transactions, such as CFDs, futures contracts, warrants and options. Furthermore, it covers some simple risk management techniques that can be applied to protect profits and limit losses.
Advantages and Disadvantages Position Trading
There are many benefits of using position trading as your investment strategy, including:
- Reduced market exposure: investors can hold their positions open for a long time which reduces the amount of capital required to trade;
- Greater price stability: when compared to day trading, the prices of assets tend to be more stable over a more extended period; and
- Profit opportunities: because position traders buy and sell over a more extended period, they may have the chance to make more profitable trades than day traders.
However, like with most investment strategies, there are also some disadvantages, including:
- Lower liquidity: due to the current regulatory framework in Australia