In Australia, position trading is a form of derivative trading that involves taking a long or short position in an asset or security. Positions traders are typically looking to profit from changes in the underlying security price rather than from buying and selling the security itself.
There are two main types of position traders: directional traders and hedgers. Directional traders believe that the price of a security will move in a particular direction and take a long or short position accordingly. Hedgers use positions trading to protect themselves against unwanted price movements in the future.
When entering into a position trade, it’s essential to understand the risks involved. Always be sure to read up on the company or security you’re investing in or speak with a financial planner.
Positions trading is one of Australia’s most popular types of options trading. When done correctly, taking positions can benefit small and large investors alike. New professionals need to understand all aspects of position trading before committing any capital to this form of market transaction.
How To Trade With Positions?
Choose the Right Broker
When looking for a broker, it’s crucial to find one that offers a wide range of products and services, as well as competitive spreads and commissions. Brokers that specialise in positions trading will be your best bet, as they will have a deeper understanding of the market and the products available.
Understand the Risks Involved
As with any form of investment, there is always risk involved when trading with positions. Before entering into any trade, be sure to understand the risks involved and never invest beyond your means.
Choose the Right Security
Not all securities are suited for positions trading. When choosing a security to trade, be sure to do your research first and only trade stocks or ETFs that you are familiar with.
Open a Trading Account
You will then need to register a trading account with a broker to trade positions. This can be done online in minutes, and most brokers offer a variety of account types to suit your needs.
Fund Your Account
Once your account is open, you will need to fund it to start trading. Most brokers accept various payment methods, including credit/debit cards and bank transfers.
Choose the Right Type of Trade
There are two main types of positions trades: directional and hedging. Directional trades involve taking a long or short position in anticipation of a security increasing or decreasing in price. Hedging positions include taking a position that protects against future adverse movements in the price of a security you already hold.
Choose the Right Product
Several different types of products are available to trade with positions, including options and futures contracts. Each has its unique features, and it’s essential to choose the right one for your trading needs.
Enter Your Order
Now that you’ve chosen your product, it’s time to enter your order. Depending on the product you have selected, you will either enter an order as a market maker or limit maker. Make sure that your buy or sell price is fair, and then place your trade using the broker’s trading platform.
Monitor Your Position
Once your position is open, you will need to monitor it closely to ensure that you are still in profit. Make sure to set appropriate stop losses and take profits orders to minimise your losses and maximise your gains.
Close Out Your Position
When you have reached your desired outcome, it’s time to close out your position. You can do this by selling the security back to the market at the current price or by taking an offsetting position.
Record Your Trading Activity
You should always keep a record of your trading activity, especially if you are new to positions trading. Keep a record of all of your trades, including the date, product, price, and outcome.
Review Your Trading History
As your trading history grows, take some time to review it regularly. This will allow you to assess your overall performance and determine whether or not you are meeting your trading goals. If you aren’t, reassess your position trading strategy and make the necessary changes.
Now that you know how to trade with positions, sign up for a free trial here.