Ticker

6/recent/ticker-posts

How to Positionally Trade in Stock Market without loss

 Introduction:

Positional Trading is refers to investment made by the investors for fast capital gain in short period of time. The time frame for positional trading is less than 1 year. Positional trading is nothing but grabbing the opportunity on time. 


Positional trading


Positional trading is very common in stock market. It is done by both small investors and big investors. Even, big investors like Rakesh Jhunjhunwala, Radhakishan Damani also positionally trade to get the capital for long term investment. 

When Positionally Trade:

1) Technically Positional Trading:

In this situation the investors makes the positions by doing technical analysis. They keep watch on the stock prices and pick the stocks which are at low level than the price at which it normally traded. 

For e.g. At the time of lockdown the share price of many stocks are at 40% to 50% down from its original price. At that time the people who have made the positions their investment will be doubled in 6 months. In the March, 2020 the share price of Reliance Ltd was Rs 900 something today its price is Rs 2000.

2) Corporate Actions:

In this situation the investors makes the positions when the companies take corporate actions like stock split,bonus share, dividend, buyback of share, offer for sale etc. These events affect the share price very well. 

How to Trade when company Announced-

A) In case of dividend/ split/ Bonus:

When a company announced the dividend or split of share or bonus share buy that share before the ex- date and sell it on ex- date. This is often because after these type of announcement many investors and operators makes the positions in that stocks and the share price of that company will goes up. On ex- date the operator's and some investors square off their positions on high price and the price of share falls. 

e.g. The board of Majesco company announced a dividend of Rs 974 on 15th December at that time share price of majesco company is Rs 985.45. After this event the share price was falls at Rs 12.80.

e.g. On 2nd February, 2021 Dixon Technology company announced stock split at that time share price of the company was Rs 15,000. After one week the share price goes up to 20,000.

B) In case of Buy back:

When company announce buy back of share the share should hold after the ex-date because the share price will goes up due to heavy buying by the investors. 

e.g. TCS company have announced buy back of share on 7 October, 2020 at a premium of Rs 400. That time price of share was at Rs 2,600. After this event company crossed its 52 week high at Rs 3,354.

C) In case of offer sale:

When company announce offer for sale wait for that event happening because as company offers it at discount most of the investors sell the shares. So, the price is also adjusted with offer price. So, can buy it at low price. If you have already  a position in that share then sell it immediately. 

e.g. IRCTC announced OFS at 15.5% discount of Rs 1367 against previous close of Rs 1,617. After the event the share price was traded at Rs 1300.

3) Special Events:

This is the safest time for positional trading. This types of events came 2-3 times in the year. Nifty 50 rebalancing is a great opportunity for positional trading. In this event you should always track media for the nomination for the Nifty 50 and make positions in that share. As all the stocks which are in nomination are fundamentally strong they give you good returns. 

Positional trading
Source: YouTube|Created by SMKC 



As per above example ABC, DEF, GHI, JKL, MNO are the companies which are nominated for XYZ i.e.Nifty 50 index. Suppose you make the position in all the above shares. Investors become more greedy towards these stocks, so the share price of these stocks goes up. Then you can sell it at high price and also you can hold it. If suppose ABC Ltd entered in xyz index. The all remaining stocks falls but you can hold them as they are fundamentally strong. 

Strategy for Positional Trading:

1) Always trade in fundamentally strong shares:

To avoid the risk of loss in positional trading invest in only fundamental shares. 

2) Hold for long term:

Basically, positional trading is always done for short term period. But, if the uncertainty happens in the market like covid 19, war etc. So, to avoid loss you should hold it for long term. 

3) Buy on dips:

Do not put all the money at time in positional trading. Always invest in part. e.g. if a stock falls 5% invest 10% of money you have . If it further falls 5% again invest 10%.

4) Trade in large or Mid cap:

Avoid trading in small cap and penny stocks. 

5) Always set a stop loss:

The investors who can not see much time his portfolio in red set a stop loss as per their risk capabilities. This is good to set a stop loss to minimize the risk. 

I hope you all understood how to positionally trade in stock market without loss. If you like these article write your comments below also subscribe me below. 

Post a Comment

3 Comments