Intraday trading vs Position trading
Each trader has an opportunity to
choose the form of trading from the two key options available on the share
market, i.e., Intraday and Positional. There is no need to pick one of them
as the trader can choose both options with his single Demat account for
trading. But according to his investment, the trader must choose his form of
exchange, which will make him wealthier in the market.
Significant differences between
Intraday and Position trading.
1. As the name Intraday
itself suggests, you never have overnight positions in intraday trading. In
other words, when the market closes, all open positions are taken out and you
will have a net profit or net loss depending on your trading’s. Whereas In
positional trading, depending on your trading process, risk management strategy
and the time frame of interest, you can carry or hold onto overnight positions.
As the simple reference span to book earnings, you could be positional with a
1-2 days’ time frame or you could hold trades for a week or months long time.
Intraday trading
2. Intraday trading is
basically the type of trading where after the markets open in the morning of
every trading day, you open trading positions and close them until the end of
the day. In 24-hour markets, at the end of the trading day, you actually close trades
and positions. Price movement in an intraday transaction would be a
fraction of the regular average range traded. For example, if the daily range
is 100 points, your trade can aim 20-50 points. The ranges are proportional to
the time of interest and would be multiples of these numbers in a positional
exchange. On the other hand, Positional trading is that type of trading where
traders are prepared to hold positions as long as one or more days, weeks or
months are necessary. The time frame relates to the preference of traders for
positional trading.
3. When it comes to carrying
certain position for just a few days, a short-term positional trader can carry
positions. Coming to long term for days, weeks or months, a long-term
positional trader can carry positions.
4. The type of trading that
you use could be the same. What is evolving is the needs for working capital
and risk power. Generally, these are much higher. Therefore, you would probably
need 50 percent or more working capital for a simple positional trade as a
margin to carry forward futures contracts overnight.
What is Positional Trading?
5. Since the positional
trading ranges are much larger than the daily ranges, the risks of stop loss
can be greater than intraday risks (although not always necessarily).
6. If a trader has huge
capital and lots of patience it is vital for long term trading. On the contrary
if a trader is impatient, he can opt for intra-day trading.
7. As a comparison to
Positional trading brokerage, intraday trading brokerage is less.
8. Compared to Positional
trading, a trader can make money in intraday trading in a quicker way.
9. It is necessary for an
intraday trader to be efficient and have a close look on the market to execute
orders quickly and book earnings quickly because there’s no much time. But a
trader trading in positions can take time to analyze and understand the market
trends and accordingly move to generate profit.
10.Full time traders can opt
for Intra-day and Position trading but office goers who can’t sit in front of
the screen for the whole day cannot opt for Intra-day trading.
Long term positional
trading
You trade like an investor
with a horizon of weeks and months in this method of trading. The stop loss
risk levels can go as high as 100-200 points because the trading ranges are
wider, while the incentives can go from 200-1000 points or more. Once you have
tasted success in the above-described intraday or short-term positional
trading, you can then consider this form of trading.
Pros and cons of Intraday trading
Benefits of Intraday trading
· For a short period of time, traders aim for a small target
and can make big profits.
· Intraday uses a form of trade very frequently, because the
volume of the trader is high, so that the trader can easily position a trade.
· Brokerage: As a contrast with Positional, brokerage is low in
intraday trading.
· A trader can make money in intraday trading in a quicker way.
· A trader can start his trade with a low investment.
Cons
· A trader requires adequate guidance and knowledge before
trading in Intra-day.
· Intraday trading, because of the short length of the day,
takes a very long time. If you have a full-time job, it is very hard to handle.
· The handling of intraday trading is very stressful. Since
concentration is needed.
· Intraday trading is very dangerous, a big loss can result
even from a small mistake.
Pros and cons of Positional trading
Benefits of Positional Trading
· It is less risky as compared to Intra-day trading
· They are capable of producing higher percentage returns
· They offer a range of strategic choices.
Cons
· Before investing, traders have to do too much research. Since
the trader will be investing for a long time.
· Traders need to wait a long time to get their investment
rewards or gains.
· He has to think about his investment if the trader has
invested in the wrong share. And it'll result in bringing stress on a trader.