Long Term Investing V/S Positional Trading

People feel, investing and positional trading are two distinct approaches. However, my understanding and practical application of these concepts have led me to conclude that they are, in fact, two sides of the same coin.

To begin with, it is essential to define what we mean by positional trading. In simple terms, it refers to taking a position in the stock market with the intention of holding it for a more extended period, usually between a few weeks to a few months. The rationale behind this approach is to capture a significant portion of the price movement, which is not possible in short-term trading.

The key to successful positional trading is to identify and analyse the fundamentals of a company. This includes factors such as its earnings potential, market share, management quality, industry outlook, and macroeconomic conditions. Based on this analysis, an investor can take a position in a stock that has a high potential for growth in the long term.

Now, some may argue that this approach sounds like traditional investing. However, the crucial difference is that in positional trading, the focus is on capturing the price movement rather than holding a stock indefinitely. In other words, if the stock price reaches the target level or if the fundamentals change, the position may be closed, and profits may be booked.

This leads to an important point that I want to emphasise - a positional trade can quickly turn into a long-term investment if the fundamentals remain the same or improve. For instance, if a company secures a significant contract, its earnings potential may increase, leading to an upward movement in its stock price. In such a scenario, the investor may decide to hold the stock for a more extended period than initially planned, and the trade may convert into a long-term investment.

Furthermore, it is worth noting that in positional trading, the holding period is not predetermined, and it depends on the market conditions and the individual's trading strategy. This flexibility allows investors to adapt to changing market conditions and take advantage of new opportunities that may arise.

In summary, investing and positional trading are not mutually exclusive concepts. They are both rooted in the analysis of a company's fundamentals and are aimed at generating profits over the long term. The primary difference between the two lies in the holding period and the focus on capturing price movement in positional trading. However, it is essential to keep in mind that a positional trade can quickly turn into a long-term investment if the fundamentals remain strong, and the investor's set parameters are met.