Are you tired of constantly monitoring the market and stressing over every price fluctuation? If you’re looking for a simpler, more hands-off approach to trading cryptocurrencies, the position trading strategy might be just what you need.
Unlike day trading or other high-intensity strategies, position trading involves buying and holding an asset for weeks, months, or even years, to take advantage of long-term market trends.
In this article, we’ll explore the ins and outs of position trading, including how it works, the benefits, and how you can use it to grow your crypto portfolio with consistent profits.
What is the position trading strategy?
Position trading is a trading strategy that involves buying and holding an asset for weeks, months, or even years to take advantage of long-term market trends.
The price of most crypto assets with good fundamentals and userbase always trends up over an extended period of time (1 to 10 years).
Position traders buy these assets and hold them for a long time (ignoring the short-term volatility) to capture the potential future price increases.
The goal of the position trading strategy is to take advantage of long-term market trends, rather than trying to make short-term profits from small price movements.
Position traders use fundamental analysis to identify undervalued crypto assets with long-term growth potential.
Some traders may also use technical analysis (TA) to determine the best entry and exit points for their positions.
However, TA is not required for successful position trading but it can give you an edge in finding the best entry price to buy at.
The difference between position traders and investors.
Position trading is similar to crypto investing (HODLing) which involves buying and holding an asset for an extended period.
However, there are several key differences between the two:
- Timeframe and exit strategy: Position trading typically involves holding an asset for weeks, months, or years, while crypto investing may involve holding an asset for even longer periods (decades or forever) and usually without a specific exit strategy.
- Trading strategies: Position trading involves actively monitoring and adjusting positions to take advantage of market trends, while crypto investing generally involves a passive buy-and-hold approach.
- Opportunistic approach: Position traders are opportunistic investors. They’re more actively engaged with the market and are willing to adjust their positions more frequently in order to take advantage of short-term opportunities or mitigate risk.
- Investment goals: Position trading often has the goal of maximising profits through active trading and may involve using leverage and other advanced trading strategies, while crypto investing often has the goal of long-term price appreciation and asset accumulation.
I consider position trading as the best crypto trading strategy as it’s simpler and has higher profit potential.
However, it requires tons of patience, discipline, a good understanding of the market, and fundamental analysis.
How to execute the position trading strategy
If you want to use the position trading strategy to make consistent profits in crypto, here’re a few simple steps you can follow.
- First, DYOR and identify crypto assets that have strong fundamentals and long-term potential. Adding TA to the mix
- Identify your entry and exit prices. You can use fundamental analysis to identify undervalued assets and TA to find appropriate entry and exit prices. A combination of both will give you a greater edge and confirmations.
- Choose a reputable crypto exchange to trade on. Binance, Coinbase, Kraken, and KuCoin are some of the best ones to choose from.
- Have a predetermined profit target and set your stop loss accordingly. Be realistic with your expectations and don’t get too greedy. For example, your profit goal could be 10 to 50%, 2x, 10x, or even 100x. Whatever you feel is attainable based on your research or analysis.
- Place your buy or sell orders accordingly and wait for the market to do its thing. I will usually set all my buy and sell limit orders and continue with my normal life, away from the screens.
- Monitor the market regularly to keep track of price movements, identify any emerging trends, and seize any unusual profit opportunities.
- Be flexible. Review and adjust your plans regularly based on the changing market conditions or new information.
- You can trade a few assets simultaneously if you have a sizeable portfolio and want to spread your risk.
An important thing to note before using the position trading strategy
You must be willing to hold any crypto asset you buy for an extended period without freaking out if the market temporarily moves against you.
And that requires that you have done your due diligence to determine the viability and sustainability of the project before investing in it.
So that if the price goes in the opposite direction after you bought it, you will be confident to keep holding it like a regular investor.
The risks of position trading
- If you use the position trading strategy on shitcoins or some obscure cryptocurrencies with no tangible product or use cases, you will likely lose all or most of your money.
- The project can fail or die due to many factors and the team can exit the scam or abandon the project. As such, it’s important you stay up to date with the project’s development progress.
Therefore it’s important to do thorough due diligence and trade only solid crypto assets with good potential.
Position trading can be a powerful strategy for making consistent profits in the crypto market.
With proper due diligence, setting clear entry and exit points, managing your risk, being patient, and staying disciplined, you can greatly increase your chances of success with this trading strategy.
I encourage you to put this strategy to work today by starting with a small amount and increasing your exposure as you gain more knowledge, experience, and confidence.
How do you use the position trading strategy to make consistent profit in crypto? Share with us in the comments section below.
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