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Finance GlossaryPositional Trading
Positional Trading
Definition of Positional Trading
Positional Trading is a trading strategy where a trader keeps their position (long or short) for weeks to months. Unlike intraday trading or swing trading, positional traders do not pay attention to minor price fluctuations and focus on fundamental analysis, economic trends, and long-term technical patterns to predict the overall direction of a security. This strategy is less time-intensive and is often preferred by traders who are looking to capture major moves in the market with lower transaction costs.
Related Terms
Bull Market
Bull market is a positive trend in the stock market where price of shares increase by 20% or more after falling by 20%. Investors may say they’re bullish or expect a bull market to arrive when they believe that there will be prolonged periods of increase in the stock market.
S&P 500
The S&P 500 is a stock market index in the US and tracks 500 of the largest publicly listed companies in the country. The S&P 500 represents a wide range of industries. Often, it is used as a benchmark for the performance of the global equity market. Many investors consider the index as a picture of how the overall US economy is performing. It also reflects the overall market sentiment.
Return on Equity (ROE)
The Return on Equity is a metric that helps to find the how effectively a company uses the money of its shareholders to generate profits. The ROE can be obtained by dividing the new profit generated by the equity of shareholders. When a company has a higher ROE, it implies that it has a strong management and strong profitability. Investors often compare the companies within the same sector using the ROE. The ROE also helps investors determine the potential of the company to generate wealth in the long term.
Offer for Sale (OFS)
Offer for Sale (OFS) is a process that allows current shareholders, typically promoters, to sell their stake in a company when it gets listed via an Initial Public Offering (IPO). It is often used to dilute ownership or comply with regulatory norms and is completed within a short, predefined trading window.
Arbitrage
Arbitrage is a strategy where a security is bought in one market and sold in another market to generate profits due to the difference in price. This difference is known to be minor.
Say for example a share trades at Rs. 1000 on NSE and Rs. 1002 on BSE. The share can be arbitraged by buying it on BSE and selling it on BSE for a profit of Rs. 2.
Say for example a share trades at Rs. 1000 on NSE and Rs. 1002 on BSE. The share can be arbitraged by buying it on BSE and selling it on BSE for a profit of Rs. 2.
Liquidity
Liquidity determines the ease with which an asset can be sold in exchange for cash at or around its current market price. Liquidity is also used in the context of businessess, where the term indicates the company’s ability to secure loans to fulfil short term debt obligations or to sell its assets and procure cash in exchange.
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