Positional Trading: Patience Is the Name of the Game

Positional trading refers to holding a market position either long or short over an extended period, often spanning several weeks or months. This approach is grounded in analyzing long-term price trends while ignoring the daily noise of short-term market fluctuations. 

A common misconception is that positional trading only applies to bullish (buy) strategies. In reality, it encompasses both buying and selling setups, depending on the market structure and technical patterns. Traders who employ this method often rely on chart patterns that take time to form, offering high-probability trade setups when confirmed. 

Let’s look at some of the most well-established patterns used in positional trading. 

Head and Shoulders Pattern

This pattern mirrors the structure of a human head and shoulders and typically signals a bearish reversal. It forms at the top of an uptrend. 

• The setup is confirmed when price breaks below the neckline, triggering a potential downtrend. 

• In certain charts, a candle may initially bounce off the neckline, but the real signal appears when the subsequent candle opens below and fails to reclaim the neckline, often supported by volume spikes. 

Traders can enter: 

• Aggressively on the neckline bounce-down 

• Conservatively on the next day’s candle after volume confirmation 

Inverse Head and Shoulders Pattern 

A mirror image of the previous formation, this bullish reversal pattern appears at the end of a downtrend. 

• Once the price breaks above the neckline, it indicates renewed buying interest. 

• A strong entry point can occur either: 

• Aggressively, at the neckline breakout 

• Conservatively, after a confirmation candle (such as a bullish engulfing) follows a weak red candle near the neckline 

This pattern often follows prolonged consolidation, making it a reliable base for upward moves. 

Cup and Handle Pattern 

This bullish continuation pattern looks like a teacup with a small handle. It starts with a gradual rounding bottom, followed by a minor pullback, forming the “handle.” 

• As the price tests the previous resistance, it briefly retreats, forming the handle. 

• A bullish engulfing candle that closes above the resistance line is often a strong signal. 

• If this breakout is accompanied by a volume spike and a gap-up, it indicates a high-confidence buying opportunity. 

The handle can take many shapes like a flag or pennant and is often a healthy sign of consolidation before a larger rally. 

Double Top Pattern 

This bearish reversal setup occurs when price action forms two peaks around the same level, separated by a modest decline. 

• The first peak follows a sustained uptrend and is followed by a 10–20% pullback. 

• Price then attempts another rally but fails near the previous peak, showing resistance and low volume. 

• For the pattern to be confirmed: 

• The support line formed by the lowest point between the two peaks must be broken 

• This breakdown should occur with strong volume, signaling selling pressure 

Entry is ideally placed after the support line breaks, not before. 

Double Bottom Pattern 

This pattern is the bullish counterpart to the double top and follows the same principles, in reverse. 

• The first bottom forms after a significant downtrend, followed by a 10–20% bounce. 

• A second dip forms, typically on lower volume, indicating that sellers are weakening. 

• A strong rally with rising volume breaks through the resistance created by the earlier rebound highs. 

• Entry is taken after the resistance breakout, with confirmation from volume and price action. 

Conclusion 

Positional trading has a unique edge it frees traders from constant screen time. Once a trade is identified and placed, it simply requires periodic monitoring rather than minute-by-minute analysis. Since it ignores short-term market volatility, it reduces emotional decision-making and encourages strategic discipline. 

That said, there are trade-offs: 

• More capital is typically required 

• Liquidity risk increases as funds are tied up longer 

• However, leverage opportunities and reduced noise can work in your favor if managed well