Intraday vs positional trading: Which is better?
Stock trading requires a trading strategy to succeed, and there are several types in the market. However, the two common types are—intraday and positional. A common dilemma faced by every trader is which trading style to choose since they all come with their risk and rewards. The selection of trading style is a vital step and helps you decide when to buy or sell your stocks in the market. It will accordingly yield returns in the market.
What is intraday trading?
Intraday trading also refers to as day trading. In this type of trading, you get to buy or sell stocks on the same day itself. Based on small market movements, stocks are traded within a few minutes to hours. Intraday thus offers the possibility of earning higher returns in the short term. In this type of trading, you need to close your sale-purchase transactions before the market completes. It brings with it increased risk and is usually performed by experienced traders.
What is positional trading?
Positional trading offers you the option to hold stocks for a more extended period. The stocks are traded within a few weeks to months. Positional trading offers higher returns in the long term. In this type of trading, you need not devote all your time and energy to the market. If you are a beginner in the stock market with a low-risk capacity, positional trading is for you.
Intraday vs positional: Which is better?
Stock trading brings the risk factor with it. Thus, there is no best type of trading in the market. You need to ascertain which one is suitable for you. You cannot enter into the world of stock market trading without showing the type suited for you. The kind of trading you select will determine your trading strategy. Based on this strategy, you will face certain risks and rewards.
To help you decide which is better, let’s have a look at the pros and cons of each:
PROS OF INTRADAY:
- You can start with a small investment.
- The potential to earn returns is much higher.
- The time frame is short. Thus you can earn higher returns in a short period.
- You can make other frequent trades with your money.
- You do not have to worry about your positions overnight.
CONS OF INTRADAY TRADING:
- The risk of losing capital is very high.
- You need to conduct adequate research, including technical analysis, and follow market trends regularly before intraday trading.
- You have to be very methodological in your planning.
PROS OF POSITIONAL TRADING:
- Since it allows you to hold your stocks for an extended period, it provides flexibility.
- It brings with it moderate to low risk.
- You can earn high returns in the long term by holding your stocks for weeks to months.
CONS OF POSITIONAL TRADING:
- You need not dedicate all your time and energy. Positional trading gives you the flexibility to trade. If you are a working professional who cannot fully commit to the stock market, then this type of trading is ideal for you.
- It gives you the freedom to adopt multiple trading styles.
- You need to invest a large sum of money at the start.
- Overnight risks can lead to changes in your position in the market.
- Your investment is locked in for a more extended period.
- There is a higher risk at stop-loss. Stop-loss refers to minimizing your losses against a trade through a buy or sell order. Since positional trading requires you to invest large sums of money in each trade, there is a higher risk at stop-loss.
Each trading style comes with its set of risks and rewards. Thus, you have to weigh the pros and cons of each, depending on your financial goals, risk-taking capacity, and time horizon. Based on these aspects, you can determine whether intraday or positional is better for you.
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