by Frank Soler of SolerInvestments.com
About a week or so ago, I was asked to review the performance
results of a new client's trading portfolio for the Year
2006. After a quick scan of what I saw it was obvious to
me that this trader tried to trade everything, and in every
different time frame, more often than not to the devastation
of his trading account balance.
He had made multiple day trades (a style of trading where
all positions are open and closed before the end of the
trading day), a number of swing trades (a method of trading
where one takes a position for several days to several weeks),
and many others that fit into the category of actual long-term
investments rather than actual trades, and others still
that were held for shorter periods of time.
The first question I asked of him after viewing his results
was "What type of trading is your main focus?"
He looked at me and replied, "Well, position trading,
of course! I find trades to take and open positions in them
until I sell them." The funniest thing about his comment
was that he was dead serious; he truly thought he was a
Needless to say, but to most experienced traders, and even
a large portion of beginners, it is obvious that this trader
needed some serious help with his trading. Luckily, after
some deep discussion I helped him discover that he really
needed to find a specific trading style that fit his personality
and to stick with only that style and time frame until his
trading results improved.
Turns out he prefers swing trading and signed up for our
trading service that we offer online at SolerInvestments.com,
swearing he'll stick only to this style as we teach him
how to trade successfully first before he eventually ventures
back into other types of trading such as position trading
or day trading.
But, what really is position trading? Using stocks as an
example, when you choose to become a position trader,
you are essentially saying, "I am going to be buying
stocks and holding them for an extended period of time.
My plan is to hold this position with a longer term outlook,
usually from three months to a year."
When position trading, you are NOT buying this stock
to sell it off later today, you are NOT buying this
stock with the hopes of taking profit from it within a couple
of days or weeks. You are NOT making a buy and hold
investment purchase in this stock and planning to sell it
a few years from now.
Position trading is similar to swing trading, but with
a longer time horizon. Position traders hold stocks for
a time period anywhere from three months to a year. These
traders seek to identify stocks where the technical trends
and/or the fundamentals analysis of a stock suggests a possible
large movement in price is likely to occur, but which may
not be fully played out for several months.
As with any type of trading, you must know what you are
planning to do with a trade, BEFORE entering the
position. If your decision is to be a position trader, don't
let your trades turn into anything but a position trade.
I can't stress how important this is in trading, it really
can be the difference between making it in trading or going
The more times you let any trade, position or otherwise,
turn into anything other than what you planned it to be,
the more times you're failing to follow your plan, and without
a plan you are bound to fail.
Frank Soler is a successful trader and Registered Investment
Advisor. His company, SolerInvestments.com, provides real-time
Futures, and Stock Picks, and a free
online trading education center.
Copyright @ 2007 Soler Investments. All
Rights Reserved. Reprint of this article is allowed as long
as due credit is given to the author and links are left