Position Trading: The Long-Term Approach

Overview

Position trading holds trades for weeks to months, capturing large directional moves driven by macro themes. It requires the least screen time of any active strategy and the most patience. The edge is large trends; the challenge is enduring normal volatility without flinching.

Setup

• Instruments: index ETFs, commodity ETFs, large-cap stocks, major forex pairs
• Timeframe: weekly for trend, daily for entries
• Indicators: 10-month (200-day) SMA, 50-week SMA, ATR(14) for sizing
• Macro filter: interest rate differentials, earnings cycles, commodity cycle

Entry rules

1. Confirm the weekly trend: price above the rising 50-week SMA
2. Wait for a pullback to the 50-week SMA or a breakout from a multi-month base
3. Enter on a weekly close confirming direction
4. Add to winners on subsequent pullbacks (pyramiding)

Stop loss rules

• Initial stop: below the swing low, or 3 × ATR(14) on the weekly chart
• Never risk more than 1–2% of account on the initial position
• Exit only on a weekly close below the stop — intraday noise ignored

Take profit rules

• No fixed target — position traders ride major trends
• Trail the stop under the 50-week SMA
• Scale out 25% at 2R, 25% at 4R, hold the remainder for the trend

Risk management

Parameter	Value
Risk per trade	1–2% of account
Max concurrent positions	6
Position size	Risk ÷ (entry − stop)
Drawdown pause	15% portfolio drawdown → halve risk
Pyramid rule	Add only when up 1R, never into a loser

Use the position size calculator for the initial entry and each pyramid add.

When it fails

• Exiting on intraday volatility against the thesis — only weekly closes matter
• Adding to losers in a "averaging down" mentality — never pyramiding into a losing position
• Holding through a clear regime change (e.g., 200 SMA break on the index)

Key principle

Position trading is about having the conviction to sit through 5–10% adverse moves while the macro thesis remains intact. The 200-day SMA is your regime line — respect it.