Learning about position trading strategies is key to anyone interested in trading stocks in the stock market. Identify position trading opportunities, which can include a wide variety of potential stock moving events, including but not limited to: new product rollouts, seasonal events (such as seasonal sales spikes), anticipated government policy changes, company events (such as industry conferences), and company earnings reports. ETrade’s stock analysis tool is offered to clients for free when opening a new account.
Buy or sell short (short if you are anticipating a price drop) a stock position far enough in advance of a potential stock moving event to take advantage of anticipation buying or selling that may start causing the stock’s price to increase or decrease prior to the expected event. A stop loss order should be entered to protect a stock position from unexpected events that cause a move in the stock’s price that is not anticipated.
A stop loss order is particularly important when position trading, since position traders do not have the time to constantly monitor the news flow associated with a stock that they hold a position in. A stop loss will limit any unexpected losses and help a position trader sleep better at night. Usually, the stock market offers ample position trading opportunities to implement position trading strategies.
While holding a position trading stock position, it is a good idea to check the news flow associated with the stock(s) you are holding at least once per day to assess whether new developments associated with the stock require adjustments in the position trade or even closure of the position trade. For example, if your position trade is the anticipation of a new product launch, and a news story comes out that says the product launch has been delayed for three months, you may want to rethink the position trade. Meaning, a position can be taken in a stock expecting a move higher (long) or a move lower (short).
Apple’s stock often trades higher in the days prior to this widely followed developers conference, as AAPL stock traders buy AAPL in anticipation of potential stock moving announcements from the conference. Position trading from the long side can be difficult or impossible during sharp market selloffs, as the broad downward movement of stocks during a market selloff may negate any potential position trading gains from long positions. When a stock is going up, traders will often remain in the trade in the hope” of recouping past losses.