Position trading is a long-term strategy where traders hold positions for months to years, focusing on major market trends. It is similar to investing but involves active monitoring of economic conditions, sector performance, and macroeconomic indicators.
This approach is less concerned with short-term volatility and more focused on capturing significant price movements over time. Nifty and Bank Nifty futures, ETFs, and index funds are commonly used for position trading as they reflect broad market trends.
Key Characteristics:
- The objective is to hold positions for months to years to capture large market trends.
- Works best in strong trending markets, following economic cycles and policy changes.
- Risk management relies on fundamental analysis and macro trends rather than just technical indicators.
- Uses quarterly earnings reports, interest rates, GDP growth, inflation trends, Moving Averages (200 EMA), and Chart Patterns.
Time Frames Used:
- Entry & Execution: Weekly (W1), Monthly (MN) charts
- Confirmation & Trend Analysis: Quarterly & Yearly market cycles
Example:
A trader buys Nifty at 19,000 during a correction phase and holds it for one year, exiting at 23,000, making a 4,000-point profit. With 1 lot (50 quantity) in Nifty futures, this results in a ₹2,00,000 profit.