Fundamental Analysis and Position Trading: Evolution of a Trader

CHAPTER 18

Introduction to Position Trading

A hundred feet below my office as a senior software engineer stood the main branch of the Fort Worth public library. I descended from my office about once a month to visit the library during my lunch hour.

Cosmopolitan was always a hit, because I wanted to understand what the ladies thought we (guys) were thinking, and the quizzes were a lot of fun, too. But Technical Analysis of Stocks & Commodities magazine was also a priority even though the pictures were not as sexy. By reading TASC, I began to learn about chart patterns.

In the buy-and-hold years of my flirtation with the markets, I watched stocks I owned double in price and then drop by half—or more. Many times, I was lucky to grab a substantial profit along the way, sometimes by just waiting for another up cycle. There had to be a better way, I thought, and there is: position trading. Position trading is what this section is all about. The chart patterns I read about decades ago still play a major part in how I position trade today.

WHAT IS POSITION TRADING?

Position trading means buying a stock and holding it until the trend ends, then selling. Buy and hold means hanging onto a stock for years, but a position trade usually has a hold time measured in weeks and months, not years.

Position trading is more difficult than buy and hold because it is less forgiving. In position trading, you are trading securities, trying to time the market. If you cannot successfully do that, then ...