Position Trading or Day trading?
Finding Approach Which Works Well For You
Fundamentals for Everyone
All this talk about fundamentals, which are, by their very nature, long-term indicators, might be alienating the day traders among us. I hope not, because day traders can benefit from studying fundamentals as much, if not more, than position traders. By knowing the fundamental elements affecting your market, you can be prepared to confidently enter short-term trades that are technically indicated and supported by the fundamentals. You can then either disregard or exercise great caution when acting upon technical signals that contradict the fundamentals. The fundamentals act as a compass pointing the general direction your market will go. Your short-term technical signals can then guide you through the labyrinth of fluctuations along the way.
Another MarketScanner chart, this one showing the results of three candidate studies. Each of the included studies can be used for screening potential investments.
Unlikely CorroborationAs I was contemplating this paper, I received a Christmas present which, to my surprise, reinforced and confirmed the points being made today. The gift was the game "StakXChange," which is a Monopoly-like board game that mixes technical and fundamental properties to guide you to profits in a make-believe futures market exercise.
Each player can take on a purely technical perspective or can combine technical indicators and fundamentals to anticipate future price moves in an orderly and efficient manner. As your piece moves around the board, you can take your signals from built-in moving averages, a relative strength index, a stochastic index, or from any number of chart formations, etc. You are also made aware of related movements in silver and gold, and other precious metals as you attempt to predict future market direction in a given market. The winner is usually the player who capitalizes on the most information. Just like real life!
The game caught my eye more for its authenticity than for the fun of playing. The developers (Momentum4Fun, Inc.) showed a great deal of insight when they put this award-winning game together. It turns out to be a learning tool for even seasoned traders who might benefit from contemplating more than just the price of a product over time.
In conclusion, despite my own dislike for watching tickers and personal preference for a laid-back approach, it is clear that many traders love the excitement of scalping the markets and derive great satisfaction from being actively involved in their investments. The essence of our findings is that success can be found in trades of any duration. Differences in profitability seem to come not from the length of your trade, but from the wisdom of the given position and from the expenses incurred.
Although I am still sold on position trading, I do not discourage real time or intra day traders. However, I believe that short-term and long-term market direction should always be based upon the longer term trends and conditions that are only evident from a market's association to statistically related markets and conditions. Day trading and position trading share a great deal in common, most notably that fundamentals can help improve trades of any duration. The added insight provided by fundamental data, which is inherently long-term, can deliver substantive benefits for both day traders and position traders. Admittedly, a bit of work is required to get to a point where you can incorporate market fundamentals into your trading routine, but with patience and perseverance, you should have something that will win, and win and win for years to come.
Written by and reprinted with permission of Bob Pelletier of CSIdata.com
The content of this article is for information only. Neither KSV.ORG website, the author, editor or CSI makes or has made any recommendation regarding the purchase or sale of any futures contract, security or other investment vehicle. Substantial risks are inherent in any trading exercise. Please seek the advice of trusted investment and tax professionals regarding the evaluation of any specific trade.