Intraday vs positional trading - Major Difference
Intraday vs positional trading - Major Difference
So, you're stepping into the exciting world of stock market trading, huh? Well, buckle up because you've got a choice to make: Intraday or Positional Trading. Let’s break it down. Intraday Trading is like a quick rollercoaster ride. You buy and sell stocks on the same day, aiming to make profits from short-term price fluctuations. It's fast-paced and requires your full attention. On the other hand, Positional Trading is more like a long-term commitment. You patiently wait for the right moment to book profits over a longer period. As a trader, selecting the right approach, based on your risk profiles and goals can make all the difference.
Let’s delve into the nitty-gritty of Intraday vs Positional Trading. It'll equip you with the knowledge you need to make an informed choice between the two. So, get ready to level up your trading game!
What is Intraday Trading?
Intraday Trading, as its name suggests, means buying and selling securities on the same day. Online trading platforms are the most common mediums to do Intraday Trading. You can buy and sell shares of a company on the same day before the stock market shuts down. The objective is to gain profit from the market volatility. Since these trades occur on the same day, this trading type is also called Day Trading.
What is Positional Trading?
Positional Trading is another trading method in which you hold the trading position for a longer time, usually weeks to months. As a positional trader, you're in it for the long haul. You hold your position regardless of short-term fluctuations, focusing on the big picture. You must utilise a long-term chart to initiate a trading position called trend following. Trend following in positional trading involves identifying and trading in the direction of established market trends to capture sustained price movements.
Major Differences Between Intraday and Positional Trading
Decode the concept of Intraday vs Positional Trading -
Benefits
Intraday trading allows for the potential of generating substantial profits by setting small targets and capitalizing on short-term price movements. Intraday is a common type of trading owing to the significant volume of trades, allowing you to place a trade simply. You can start Intraday Trading with a small amount and book quick profits. Positional trading, characterized by lower risk, has the potential to yield higher returns compared to other trading approaches. Moreover, they provide various strategic options according to your risk appetite and investment goals.
Risks
Intraday Trading and Positional Trading differ significantly in terms of the risks involved. Day Trading involves buying and selling securities within the same trading day. It carries higher risks due to the short-term nature of trades and the potential for rapid market fluctuations. On the other hand, Positional Trading involves holding securities for an extended period, typically weeks to months. While Positional Trading can be less risky, it is exposed to macroeconomic factors and market trends that may impact long-term positions.
Time Frame
Intraday Trading needs sharp eyes and consistent monitoring to grab an opportunity as soon as it appears in the charts. You must square off a position on the same day of buying the shares while doing Day Trading. NSE and BSE operate from 9.15 am to 3.30 pm, during which you must actively watch the market.
In Positional Trading, you can trade between 9:15 am and 3:30 pm and even beyond that, but the best time to open a position is when the market trend is bullish. The trick is to place an order when the trends are moving in a positive direction. Once placed, it needs less involvement from your side.
Adaptability for Beginners
Intraday trading requires a quick assessment of the market trends to place the trades instantly. Therefore, you must have some experience analyzing the markets and making efficient decisions. In Positional Trading, you get more accurate results by finding the right entry and exit points. Fundamental knowledge of stock analysis is sufficient to trade in this way, making it a more suitable trading strategy for beginners.
Returns
Although a significant risk is involved in Intraday Trading, keeping a watch for a few hours every day generates steady returns. It can yield good returns if you take advantage of increasing stock prices during bullish market conditions. On the other hand, when you do Positional Trading, you hold the stocks for the long term and book returns according to the long-term perspective.
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Conclusion
Both Intraday and Positional Trading are excellent trading strategies to capture stock market returns. However, understanding the concept of intraday vs positional trading is necessary to choose a suitable method based on your available capital, skill set, commitment level, risk appetite, and time horizon.