Friday December 09, 2022

Mastering the art of position trading strategy in Pakistan

Pakistan is one of the most dynamic and rapidly growing economies globally. The Pakistani rupee is also one of the most stable currencies in Asia. Despite this, many traders still struggle to make consistent profits in the forex market. It’s mainly due to a proper understanding of position trading strategy.

What is position trading?

Position trading is a long-term trading strategy that focuses on holding stocks or currency pairs for weeks or months at a time. It is a highly conservative trading strategy suitable for novice and experienced traders alike.

Investors use this general term to mean entering and leaving positions within short periods. In Pakistan, where the stock market lacks depth and breadth, day trading has proven to be an effective way of making quick gains in share prices. However, one should keep in mind that there is no substitute for good research and proper analysis while trading following a strategy.

Tips that can help you master this art

Keep learning from mistakes

It does not matter how smart or experienced you are, but eventually, everyone makes mistakes. It is crucial to learn from your past errors to avoid repeating them. The best possible thing one can do is learn from the experiences of other traders through social forums such as “The Karachi Stock Exchange Forums”, where members share their trading experiences.

Master the art of position trading strategy

A well-thought-out and executed position trading strategy will act as the backbone of your trade. Hence, it is essential to develop factors in current market conditions before hitting “enter”. For instance, you want to buy Stock X at Rs 100, but it has already risen by 10 points since yesterday.

Do you need to consider various factors, such as how much more you expect the stock to rise? Is there any news or announcement expected anytime soon? Will any price correction be seen now that it has run up this much?

Answering these questions helps you arrive at an informed decision on whether or not this level is right for you. It’s only an example, as numerous stocks offer good trading opportunities, to find those share prices one can accumulate. It is essential to analyse price charts and compare them with the fundamental analysis of company reports or any upcoming announcement related to the stock in question. This way, you ensure that your investment decisions are based on the chart movement and what lies behind a particular stock’s existence.

No matter how experienced a trader is, they always seek expert advice before entering a trade. It makes perfect sense because no amount of research or analysis will ever be 100 percent accurate all of the time. It would be best to have someone whose sole task is to look into all aspects of an investment opportunity and provide unbiased opinions.

Be patient

This is especially pertinent for day traders who tend to be more active and impatient than those who engage in position trading. Pakistan’s stock market lacks depth and breadth, leading to overvalued or undervalued. The key here is to identify stocks exhibiting solid fundamental characteristics and have a solid chart setup. Patience will be rewarded in the long run.

The Karachi Stock Exchange

The Karachi Stock Exchange (KSE) was established on September 18, 1947, as a voluntary organisation where licensed brokers could trade securities. Initially, it was cumbersome to buy and sell shares due to the lack of an efficient clearing and settlement system. In 1949, the first steps were taken towards creating a central depository known as the “KSE Share Transfer System” that would become the central infrastructure for the settlement of trades in securities.

In December 1989, a new system was created to issue and redeem Certificates on Depository Receipts, thus introducing a new form of trading called “Certificate Trading”. It allowed greater flexibility and convenience to investors who no longer had to deposit dividends or income certificates with the depository. After this, trading in shares moved from physical locations such as brokers’ offices to a virtual market through dealers who access stock exchange prices via computer terminals linked directly to KSE servers. In 2002, all share transactions between buyers and sellers were made electronic.

For more info on options trading in Pakistan, please follow the link.

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