Intraday Trading Vs Position Trading

Stock market traders adopt different trading strategies to make profits in the stock market. However, if we broadly categorize these trading techniques and think of the most popular ones, we get intraday trading, swing trading, and positional trading. However, it is essential to understand the difference between intraday trading and position trading. In this article, we will discuss the key differences between intraday and positional trading since the contrast between the two is stark. After you go through the “positional trading vs intraday trading” comparison, you can choose the appropriate trading strategy for yourself. 

What is Intraday Trading?

Intraday trading, also frequently referred to as day trading, is the approach that involves the buying and selling of securities, like stocks, within the same trading day. For example, an intraday trader may buy a stock of a company around 9:30 am and wait for the price to rise. Then, they sell it at around 12:00 pm on the same day since they are satisfied with the intraday upward price movement. In other words, intraday traders look to profit from short-term price variations by capitalizing on market volatility—and do not maintain overnight positions.

Open Demat Account

Your first step to enter share market

Get Started

* By signing up you agree to our Terms and Conditions

What is Positional Trading?

Positional trading is a trading method in which traders hold positions for an extended period. This period can range from a few days to many weeks or even months. Unlike intraday traders, positional traders are not concerned with short-term market movements. Instead, they concentrate on capturing wider market trends and hope to profit from long-term price movements. Now let us see the difference between intraday trading vs position trading.

Difference Between Positional Trading and Intraday Trading

Here is the difference between intraday and positional trading.

Benefits of Intraday Trading

Some of the benefits of intraday trading include the following.

• Quick Profits: Intraday trading has the potential to generate large profits in a single trading day.
• Reduced Exposure: Intraday traders are not exposed to overnight risks such as unexpected news or market gaps because they settle their positions before the market closes. 
• No DP Charges: Intraday trading does not ask the trader to pay any DP (depository participant) charges since there is no share delivery involved. 

Risks of Intraday Trading

Some of the risks of intraday trading include the following. 

• High-Stress Levels: The fast pace of intraday trading may be stressful since traders must make quick decisions and successfully control emotions. 
• Transaction Costs: Even though there are no charges, other intraday trading is not free from other types of fees, such as brokerage fees and taxes. Thus frequent trading of securities in intraday trading can lead to higher transaction costs. 
• Volatile Markets: Intraday traders are vulnerable to price fluctuations and swift market reverses, which can result in losses if not effectively managed.

Benefits of Positional Trading

Some of the benefits of positional trading are as follows.

• Greater Profit Potential: Positional traders enjoy the prospect of profiting from major price movements over a longer period. 
• Less Time Commitments: Positional trading demands less active monitoring than intraday trading, allowing traders to fulfill other obligations. 
• Lesser Transaction Costs: Since positional traders make fewer trades, the transaction costs involved with frequent buying and selling are lowered.

Risks of Positional Trading

Some of the risks of positional trading are mentioned below.

• Overnight Risks: Traders who hold positions overnight are exposed to the risks associated with night-time news, world events, or market gaps, which may result in negative price changes. 
• Patience: Positional trading demands patience and some courage to withstand short-term market volatility while avoiding emotional responses. 
• Longer Drawdown Periods: Positional traders may face extended downside periods if the market swings against them, forcing them to wait for the market to reverse in their favour.

Positional vs Intraday Trading: Which One Should You Choose?

You should consider intraday trading if 

• You are comfortable making quick decisions based on real-time data
• You are interested in profiting from short-term price movements
• You can actively spend time monitoring the markets during the day
• You have the necessary discipline and discretion to set tight stop-losses
• You can take the pressure of fast-paced intraday trading
• You know how technical works in depth 

One could go with the strategy of positional trading, if: 

• One wants to capitalize on long-term price changes rather than volatile intraday movements
• You are familiar with reading financial statements, fundamental indications, and economic data
• You just have to set up the trade and close the position over a few days, weeks, or even months
• You do not have time to monitor the markets from open to close actively
• You want to gain from long-term capital appreciation. You are comfortable if your capital cannot be used for a long period.

Conclusion
In stock market trading, intraday trading vs positional trading are two distinct trading techniques. Intraday stock trading is concerned with short-term price changes within a single trading day. However, positional trading is concerned with capturing longer-term patterns over days, weeks, or months by using this technique and information offered by a reliable stock market app. Each strategy has its own set of advantages and disadvantages. Individual preferences, time availability, risk tolerance, and trading skills all play a role in selecting the best approach. That said, intraday trading is more speculative, whereas position trading requires more thoughtful, in-depth research.