Positional Long-only Trading Strategies:
What is positional trading?
Positional trading allows traders to hold and maintain their stock market position for longer than the intraday time frame. This time span could be a day, a week, or even a month. As a result, the profit potential is higher, but the risk is also higher.
Positional trading is extremely rewarding for traders who want to bet in one direction. The most important thing in positional trading is the trade location, i.e. at what price level to buy or sell. In technical analysis, extensive research has been done on this topic.
The following two positional trading setups can be explored to identify the high-probability trade setups
a. The 52-week high breakout setup
b. Swing Trading using Fibonacci ratios
The 52-week high breakout setup
The psychology behind this strategy is that large institutional buyers are ready to risk money above the 52-week high price. It signifies the strength of the asset & high probability setup to go directional long. The same is the case for the asset price falling below the 52-week low, which signifies weakness & high probability setup to go directional short.
Rules for the Buying Entry:
1. On a Daily timeframe check for an uptrend stocks consolidating or in a range-bound movement near the highs
2. Buy when the daily candles close above the 52-week high and form a bullish candlestick pattern
3. Check for a relative higher Volume higher on the breakout candle
Exit Rules:
Place Stop loss below the previous month's low
OR
Close position if the daily candle closes below 100 EMA
b. Swing Trading using 50% pullback rule
The volatility largely leads to a zig-zag movement in the price. It is not always rewarding to buy breakouts. Hence, it is extremely important to add the pullback trading strategy along with the breakout trading strategy. The most popular setup is the 50% pullback trading strategy.
Rules for the Buying Entry:
1. On a 30 mins timeframe or 15 mins timeframe check for an uptrend stock/index making higher high - higher low (HH-HL)
2. Buy when the price pullback to 50% from the recent Swing low to Swing High and form a bullish candlestick pattern
Exit Rules:
Place Stop loss below the swing low
OR
Close position if the 15 mins candle is above 150% of Swing low to Swing High
