Strategy – Long Position

Long Position

The long position is the mother of all trading strategies, and involves buying shares or CFDs at a lower price and then selling at a higher price. Many trading strategies are derivatives of the long position or an alternate way of “going long”.

It is a common long term strategy for share traders, however, when it comes to CFD trading, going long can be risky because one cannot just sit back and wait for prices to rise because of the larger leveraged quantities CFDs demand.

Most people will find their on way of “going long” and most CFD traders use a trend following approach. Remember that trends are great but not enough if the share price has a low trading volume.

One of the first steps when opening a long position should be to find a CFD that will your risk level and style. Most CFD traders usually look for volatile stocks with a sound fundamental track record, for example blue chip shares in the top 20 to 50 index.

After becoming familiar with a share price or CFD trend, understanding its news and other factors that influence its price, it is then time to prepare a chart for technically trading a long position.

Here is a sample of  basic charting analysis. It involve four moving average periods at 11, 22, 33 and one at either 50,100 or 200. These are useful to give an idea of their position relative to the chart price.

The chart also includes a parabolic SAR at 0.09 and 20, a fast and slow stochastic at %k14, Sp3, %d 3 and 3,3,100. A momentum period at 12 and one of the most relevant indicators, MACD set at Ima 5,Tma 25, Sma5.

When is the best time to enter a long position?

There are several signals:

  1. When the moving average 11,22,33 has intercepted or is about to intercept each other at the lower part of a down trend
  2. When the MACD average and divergence lines are meeting at the lower part of a down trend and a new red trend is illustrated in the chart
  3. The Parabolic SAR is showing a new trend
  4. Stochastic is showing over sold
  5. Momentum is increasing
  6. Is there any resistance or support?
  7. Any favorable forming pattern?

In the chart bellow I have mark moments where my Entry and Selling signal is in place.

Of much importance is the selling point or closing of the position. As difficult as it is to enter, it is twice as difficult to exit a trade. Remember that it is all about achieving your intended target and not always about maximising profits. Once you have reached your target it is best to exit and reposition yourself rather than extend the trade time.

When closing a position  use the short strategy viewpoint. That is, when it there is an opportunity to “go short” it is the moment to close a long position. See how the  short strategy works.

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