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Thousands of individuals trade and invest in stocks every day on many of the popular trading platforms. They either engage in day trading or invest in certain stocks for long term gains. Those who believe in value investing are patient and wait for returns in the long run. Every trader can select their preferred trading style from the two primary alternatives, intraday and positional trading. A person may use both with a single demat account for trading. There is no need to choose just one among them. However, the trader must select the method of exchange that would increase their performance in the market based on his investment.
Let’s take a closer look at the distinction between intraday and positional trading and evaluate them thoroughly.
Table of Contents
Meaning of Intraday Trading
Intraday trading involves buying and selling securities on the same day. If a trader wants to invest in stocks, they can make decisions by monitoring the stocks on a trading platform. Many stocks can be purchased and sold on that particular day before the day closes. If one invests money wisely in this way, one’s performance may improve over a long period of time. In the short term, intraday trading may also help one get good returns on investments. One can invest in more than one stock. Suppose a stock’s price is ₹300, and one buys 100 shares. At the end of the day, the stock price moves to ₹305, and one sells those 100 shares at ₹305. So, the returns of the day amount to ₹500.
What Is Positional Trading?
Stock trading is a way of earning by buying and selling different stocks. It allows one to trade in a variety of markets. Every day, many new and old investors check the stock market and invest using their experiences. Long term and short term investing are the processes by which an investor can buy and sell shares. In positional trading, a trader buys a stock of a company and decides to sell it after many days, months, or even years to potentially get higher returns on the money invested. However, there is no guarantee of returns in positional trading. Such a trader is less concerned by short term price fluctuations and the everyday news. They don’t get disturbed by daily reports until they alter their long term approach to that position.
The price of most assets moves in response to a shift in the underlying fundamentals. On the other hand, some assets lag behind for a while before changing their pattern. This occurs due to significant modifications within the company or the industry’s fundamentals. The asset price will fluctuate for a while before stabilising. Positional trading aims to capitalise on this very fact. Before choosing between intraday and positional trading, it’s crucial to weigh the advantages and disadvantages of intraday trading. Use our financial calculator to help one make informed financial decisions.
Intraday Vs Positional Trading
Intraday Trading
Benefits
- Traders may make significant gains by focusing on a small objective for a short time.
- It is less risky than day trading.
- Since the trader’s frequency is substantial and enables the trader to place a trade, intraday regularly easily uses this form of transaction.
Risks
- Before engaging in intraday trading, a trader needs the appropriate knowledge and skills.
- Due to the briefness of the day, intraday trading is time-consuming. If one works full-time, it is quite challenging to manage.
- It takes a while for traders to get a return on their investments.
- Intraday trading is highly risky; even a minor error can result in a significant loss.
Time-Frame
- To track changes as soon as they occur, traders must constantly watch and have keen eyes. Every investor must balance their position on the day they purchase and sell shares.
- The operating hours of BSE and NSE are 9:15 am – 3:30 pm. This implies that one should start trading as soon as the market opens.
Positional Trading
Benefits
- They can produce greater returns.
- They have the capacity to produce greater return percentages.
- They provide a range of tactical choices.
Risks
- Because they plan to hold their investments for a long period, traders must do considerable research before making any investments.
- It carries less risk.
Time-Frame
- The ideal time period for positional trading is during an intense positive trend. When the trends are moving upward, one can place the order. One might place orders both before and after market hours.
- For any type of trading, the preferable hours to trade on the Indian stock market are from 9:15 a.m. to 3:30 p.m.
Difference Between Intraday and Positional Trading
Trade tactics are often used in the market, with intraday trading being the most popular. One should consider intraday trading if one is searching for quick gains. Shares and other financial products are bought and sold intraday within one trading session. It seeks to capitalise on minute market movements. Positional trading is different. It involves holding overnight positions depending on the trading strategy, risk management, and time frame. Positional trades require holding positions for a period ranging from a few days to months or even years. When a trader decides to leave, their position depends on them. Several traders select positional trading because it offers a longer time frame. Intraday trading may seem a little scary, given how unpredictable the markets are.
Factors to Consider When Choosing Between Positional Trading and Intraday Trading
Let’s discuss how one should choose between these two types of trading. Capital is the primary factor that can determine the choice. Positional trading involves greater capital affordability. Therefore, if one has limited resources, one should choose intraday trading. The ability to accept danger is the second factor. Intraday trading involves substantial risk. If one is willing to take on a significant level of risk, intraday trading is the better option. If not, positional trading is available to traders with somewhat reduced risks. Time is the third and last factor. Intraday is the way to go if one is a trader who spends the entire day fixed to the screen.
Conclusion
The difference between intraday and positional trading ultimately depends on the risk, time commitment, and investment objectives. Although there is potential for high and quick returns in intraday trading, such returns are not a guarantee. Intraday trading transactions require continual attention and caution. Positional trading, on the other hand, can appeal to people who take a more patient approach to the markets due to its longer investment horizon. Regardless of the path one takes, it is critical to follow a well-researched plan, adopt appropriate risk management, and maintain adaptability to deal with the financial markets’ ever-evolving dynamics.