The Best Positional Trading Strategy: Capture the Long-Term Trend

Hi, I’m Joey. In this section, we’re going to explain what the best positional trading strategy is. You’ll learn how to capture the long-term trend. Our long-term strategy uses the best positional trading indicators. This is because the indicators will help us time the market better. We are going to use the following positional trading indicators:

Number one: 200-day EMA

Number two: 50-day EMA

Number three: Stochastic RSI

The 50-day and 200-day exponential moving averages (EMAs) are regarded as the most powerful moving averages for position trading. These two moving averages can be used to time the overall market trend by simply studying the MA crossover. When the short-term moving average (50-day MA) crosses above the long-term moving average (200-day MA), it indicates a bull market going forward. This also refers to being the golden cross. Inversely, when the short-term moving average (50-day MA) crosses below the long-term moving average (200-day MA), it indicates a bear market going forward. This also refers to as being the death cross.

Combination of Technical Indicators

This combination of technical indicators between a moving average and the Stochastic RSI indicator works because the oscillator is comparing the closing price to its price range over a certain period of time. This combination of positional trading indicators is highly productive if used to its fullest potential.

Note: In order for this positional trading system to work, we need to use some special settings for the Stochastic RSI indicator. We can’t reveal the secret behind this fixed stochastic setting, but we have shown you enough so you can have a better chance of riding the long-term trends.

Step-by-Step Positional Trading Strategy

Below are the detailed steps of our positional trading strategy:

Step 1: Stochastic RSI Crossover Below the 20 Level

Moving averages are lagging indicators. This means that by the time a moving average crossover happens, the trend has already been put in motion, and you might be missing a good portion of that trend. Besides this, you also have to use quite a large stop loss when trading moving average crossover systems. The solution to this crossover flaw is to use the Stochastic RSI indicator with our special settings. Basically, the Stochastic RSI’s moving average will signal a golden crossover before the moving average crosses over. This can give us a tremendous advantage when getting into a trend earlier. The first signal that a bullish trend is about to start is when the Stochastic RSI produces a crossover below the 20 level. But since all technical indicators are prone to false signals, we have another confirmation signal that needs to be satisfied before pulling the trigger.

Step 2: Buy When the Price Breaks and Closes Above the 200-Day EMA

The 200-day exponential moving average is regarded to be one of the most powerful moving average and positional trading indicators to determine the direction of the trend. When the price of any given market is trading above the 200-day EMA, that’s considered by most technicians to be a bullish signal. It’s smart to assume that once we break above the 200-day EMA, a bullish trend will emerge. We buy at the market only after we have a closing price above the 200-day EMA, which confirms the breakout. Now, if we had waited for the golden cross, we would have missed a good portion of the trend.

Step 3: Place Your Protective Stop Loss Below the Most Recent Swing Low

We tested many different strategies to protect our hard-earned money, and when trading long-term trends, we’ve found out that the most convenient way to hide your protective stop loss is below the most recent swing low. Our stop-loss strategy will accomplish two things:

Number one: First, it will give the long-term trend enough room to breathe.

Number two: Second, it uses the price points on the chart which signal a change in the price structure and subsequently a possible change in the trend. And when this happens, we want to be out of the trade.

Step 4: Take Profit When the Stochastic RSI Crossover Happens Above the 80 Level and When the Price Breaks and Closes Below the 50-Day EMA

Two trading conditions need to be satisfied when taking profits. First, we again use the Stochastic RSI because it gives us an earlier signal of an imminent change in trend direction. In this case, we look for a crossover to happen above the 80 level, or in other words, when we are overbought. However, we need a second confirmation from the price, which needs this time to break below the 50-day EMA as well. Waiting for the death crossover to happen will be detrimental to your P&L because you’ll give back to the market some of your profits, which we want to avoid.

Positional Trading: Buy and Hold Strategy

Position traders are also referred to as buy and hold traders because they hold on to their trades for weeks, months, and possibly even years. Below is an example of a buy trade using our long-term trading strategy. Use the same rules for a sell trade but in reverse. In the figure below, you can see an actual sell trade example:

Is Positional Trading Profitable?

If the positional trading strategy is implemented the right way, it can yield multi-week or multi-months worth of profits. Positional trading allows for large profits to be accumulated as the trend matures itself.

Is Positional Trading Good?

Positional trading is a great trading style if you have a nine-to-five job and can’t monitor the markets all day. Position trading is the opposite of day trading and a potentially less stressful way to make a profit.

What is Positional Trading in the Stock Market?

Positional trading is an upper-class version of day trading where a position in the stock market is held for the long term. The goal of position traders is to first recognize the big picture trends and then ride the trend.

Why Positional Trading?

Position trading is less stressful, more profitable, and it requires less time to watch the markets. The appeal of position trading is that it takes out a lot of the intraday noise, and you’re only focusing on the long-term trends where the smart money is.

Conclusion: Positional Trading Strategy

When you use our positional trading strategy, the expectation of making great profits can increase considerably. To be a successful trader, position trading requires a lot of patience and discipline and not getting panicked by short-term market moves. So, if you’re super patient and if you use the right positional trading indicators, you can consider yourself lucky because you have all you need to trade long-term.

Here is another strategy on how to make money trading: Warren Buffet, the world’s greatest money maker, understood that the key to successful long-term investing is simply leaving your positions alone and doing nothing. Nothing on the planet Earth can produce wealth like capturing a long-term trend and using the power of compounding.

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