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Intraday vs Positional Trading: Which one should you choose?

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15 Jul 20246 mins readBy MOFSL

Introduction 

The stock market is a popular investment avenue to generate lucrative returns. Intraday and positional trading are two common trading strategies to make a profit in the stock market. While intraday trading aims to capture a day’s maximum profit potential, positional trading involves holding positions for an extended period to make long-term gains. 

Picking the right approach based on your trading goals and risk appetite is vital. As a trader, you can choose either one of the strategies or both with a single demat account. Keep reading the article below to understand the difference between intraday and positional trading.  

What is intraday trading?

Intraday trading involves taking fresh positions once the market opens and closing out those positions on the same day. As an intraday trader, you close your positions at a profit or loss and do not carry any positions overnight. Intraday trading focuses on making profits from short-term price fluctuations throughout the day. 

What is positional trading? 

In positional trading, you are willing to hold positions and wait for some time to generate good returns. As a positional trader, you pay less attention to short-term price fluctuations and focus on long-term gains. You may hold positions for days, weeks and even months. 

Intraday vs positional trading

Here are a few main differences between intraday and positional trading:

Time

Intraday trading requires a significant chunk of your time and attention. You need to monitor the market constantly to benefit from an opportunity. The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) operate from 9.15 am to 3.30 pm. So, you must keenly watch the market during these hours. You need to take a holistic approach and focus on charts, breakouts, news flows, etc., to make the most of short-term price movements. 

On the other hand, you can trade between the operating hours and even after that in positional trading. However, the ideal time to open a position is during a bullish trend. Try placing an order when the trend is moving in an upward direction. Positional trading does not require you to keep a constant vigil after placing an order. While you may use charts to find suitable entry and exit points, the focus in positional trading is largely on the fundamentals. 

Risks 

Intraday trading involves entering and exiting positions on the same day. It involves higher risks due to the short-term nature of trades and the potential for market fluctuations. 

Conversely, you hold positions for weeks to months in positional trading. This trading strategy is less risky since investments are held for the long term and are not impacted by short-term price fluctuations. However, macroeconomic factors and market trends can significantly impact positional trading. 

Returns

While intraday trading involves some risk, you can generate steady returns by keeping a tab on the market for a few hours each day. 

On the other hand, positional trading requires you to hold investments for a longer period, which can help generate greater returns.  

Suitability 

In intraday trading, you need to quickly assess the market trends and place orders instantly. It is therefore important to possess appropriate knowledge and skills in analysing the market and making quick decisions. 

In positional trading, you must find the right entry and exit points. It is a suitable strategy if you are a beginner since it requires a fundamental knowledge of stock analysis​​​​​​​

Conclusion

The answer to which trading strategy is suitable depends on many factors.  Both strategies are good for capturing profits in the stock market. However, understanding the pros and cons is crucial to deciding on the suitable method depending on your capital availability, risk appetite, time frame and commitment level. Intraday trading is ideal if you are not willing to take overnight risks and want to benefit from short-term price fluctuations. It is also a good option if you have less capital affordability. However, positional trading can be the ideal method if you want long-term capital gains without keeping a constant eye on the stock market


 

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Disclaimer: The stocks, companies, or financial instruments mentioned in this blog are for informational purposes only and should not be considered as investment recommendations. It is advised to consult with your financial advisor before making any investment decisions. Investment in securities markets are subject to market risks, read all the related documents carefully before investing. Investors are strongly encouraged to carefully read the risk disclosure documents prior to participating in market-related investments or trading activities. Due to the volatile nature of financial markets, no guarantees can be made regarding investment returns. Motilal Oswal Financial Services Ltd. does not offer any assured returns on market-linked securities. Please note that past performance of stocks or indices is not indicative of future results.
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