Position trading is often mistaken as swing trading, but the time frames are quite different. After talking to 100s of traders and investors, I realized most people want to position trade. They want trades that last 2-10 days. This is an ambitious goal, generating wins on this time frame but our software, Exodus, is well-equipped for the task.
I just sold my second piece of Joy Global, leaving me with just a ‘runner’ or swing position. Let’s review the reasons behind the actions taken during this trade. It was methodical and I’d like to cement this approach into my brain [and hopefully you learn something too].
The stock was chosen after completing a top-down analysis of the market. You can review the process here:
I loved the JOY chart at the time, because it had a trend day [or ‘conviction day’ as Option Addict says] to work with. This was the chart picture on the day I bought JOY:
Four days later I sold 1/3 of my position. This locked in some profits in case the stock gave back its move, which was a popular pastime back in 2015:
I held the rest of the position for 10 trading days. Once 10 trading days were done, I continued to hold the position but lifted my stop, or sell price, to the prior bar’s low.
For a position trade, that meant as long as the prior day’s low held, I would stick with it, putting me in a position to ‘milk the trend’ if it wanted to keep running. But this afternoon [day 11] I sold my next 1/3 after we took out yesterday’s low.
I use a similar method for futures trading to allow the market to run in my favor. Yesterday I did an impromptu video about this trade management.
The time frame is radically different for futures trading. I don’t even use time-based bars. I use Renko bars, but the same trade management applies, using the prior bar’s low once ten bars print, check out the video if you want some extracurricular study:
For the final 1/3 of my JOY holding I set a stop way down at my cost basis. I have no idea what JOY will do going forward, but I have a risk free swing trade in the name that can be passively managed, checking on it weekly. Not bad. There are worse jobs.
See Also: OH $JOY
People often say manage your losers and the winners will take care of themselves. Well I think that’s bullshit. You have to know how to manage your winners too. For me, that means being a bit more hands on. Your approach could be different, that’s fine.
This is just a simple method for position trading. Risk is mitigated by a 10-day or 10% stop-loss.
Mad of today my trade is up nearly 50%. They won’t all be jumbos, but some will.
JUMBO! The next idea I’m letting effervesce is much less sexy, NYLD, but I like it.
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Hi Raul, I really appreciate this post. Very detailed and insightful; great knowledge for anyone.
One quick follow up question. Why is your stop-loss for the final 1/3 lot at your cost basis? How come it’s not higher up (maybe in between current price and cost basis)?
By no means am I questioning/trolling you; merely asking for my own knowledge and application. I appreciate the answer in advance, and hope you have an awesome weekend.
It’s a good question. Maybe I should use the 68% fib retracement. Just trying to keep it simple
(golf clap)
Am I way off on this? I though swing was 2-10ish days and position was going long or short based on expectations under a year. An example would be I thought Fly had a “position” trade in TLT.
Most people agree with you, but I’m convinced a swing trade is a longer duration.
I had a solid source but I’m not finding it right now.
In reality it’s just our attempt to understand something by labeling it. Very Aristotlian of us.
Thank you for taking the time to explain the charts. Very interesting. I was wondering about the “candle” and your explanation and visual is quite helpful.