## How to Select Stocks for Positional Trading
Positional trading is a long-term trading strategy that involves holding stocks for a period of several weeks or even months. The goal of positional trading is to profit from long-term trends in the market.
To be successful at positional trading, it is important to carefully select the stocks that you trade. The following factors should be considered when selecting stocks for positional trading:
– **Company fundamentals:** The financial health of a company is a key factor to consider when selecting stocks for positional trading. Companies with strong financial fundamentals are more likely to be able to weather economic downturns and continue to grow in the long term. Factors to consider include:
– Earnings per share (EPS)
– Revenue growth
– Debt-to-equity ratio
– Return on equity (ROE)
– Current ratio
– **Technical analysis:** Technical analysis can be used to identify trends in the price of a stock. Technical analysts use a variety of charts and indicators to identify potential trading opportunities. Some common technical indicators include:
– Moving averages
– Bollinger Bands
– Relative strength index (RSI)
– Stochastic oscillator
– Fibonacci retracement levels
– **Market outlook:** The overall market outlook is also an important factor to consider when selecting stocks for positional trading. In a bull market, it is easier to find stocks that are trending higher. In a bear market, it is more difficult to find stocks that are worth buying.
#### Step-by-Step Guide to Selecting Stocks for Positional Trading
1. **Identify your investment goals.** What are you hoping to achieve with your positional trading strategy? Are you looking to generate income, grow your capital, or both?
2. **Do your research.** Once you know your investment goals, you can start to research stocks that meet your criteria. Use the factors discussed above to help you narrow down your choices.
3. **Create a watchlist.** Once you have a list of potential stocks, create a watchlist so that you can track their performance over time.
4. **Wait for the right entry point.** Once you have identified a stock that you want to trade, wait for the right entry point. This is typically a time when the stock is trading at a support level or below its moving average.
5. **Enter your trade.** Once you have identified an entry point, enter your trade. Be sure to use a stop-loss order to protect your profits.
6. **Monitor your trade.** Once you have entered your trade, monitor it regularly. Make sure that the stock is trending in the direction that you expect. If the stock starts to trend against you, you may need to exit your trade.
#### Tips for Successful Positional Trading
– **Be patient.** Positional trading is a long-term strategy. It can take weeks or even months for a stock to reach your target price.
– **Don’t overtrade.** It is important to only trade stocks that you are confident in. Don’t try to trade too many stocks at once.
– **Use a stop-loss order.** A stop-loss order will help to protect your profits if the stock starts to trend against you.
– **Take profits regularly.** Don’t be afraid to take profits when the stock reaches your target price. This will help you to lock in your gains.
#### Conclusion
Positional trading can be a profitable strategy for those who are willing to put in the time and effort to learn how to do it. By following the tips outlined in this article, you can increase your chances of success in the stock market.