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Traders in the dynamic stock market need to continuously decide: intraday or positional trading? This choice has the potential to alter your trading style, risks, and earnings.
It’s not only helpful but necessary for every trader to understand the Intraday vs positional trading.
The purpose of this article is to provide some clarity on intraday and positional trading so that you can make a well-informed decision based on your trading objectives and comfort level with risk. Let’s explore the intriguing trading world and learn how to make the most of these two popular trading styles.
What is intraday trading?
As the name implies, intraday trading entails purchasing and selling securities during the same trading day. The main goal is to make money off of temporary changes in market prices.
Due to the high level of market volatility, one of the main advantages of intraday trading is the possibility of making quick profits. Also, traders can rest easy knowing they would not be exposed to any overnight risk because all positions are closed before the market closes.
Nevertheless, there are hazards associated with intraday trading. Similar to how market volatility can result in rapid gains, it can cause substantial losses. Also, keeping tabs on the market all day is a must for intraday traders, which can be a real pain.
Example:
A trader in India buys 100 shares of a company at ₹1000 each at 10:00 AM. By 2:00 PM, the price rises to ₹1010 per share. The trader sells all shares, making a profit of ₹1000 (₹10 profit per share x 100 shares) in just one day.
The most popular chart intervals used by intraday traders are 15 and 5 minutes. One can tailor the optimal time frame for intraday trading to their specific needs by considering the volume and liquidity of stocks.
What is positional trading?
One kind of trading is positional trading, which is also known as buy-and-hold trading. In this strategy, investors keep their assets in a holding pattern for a long time, sometimes years. Over this longer period, the objective is to capitalise on price fluctuations
Potentially large gains, should the trader’s long-term forecast come true, are one of the advantages of positional trading. Also, since you won’t have to keep an eye on the market all day, it’s less stressful than intraday trading.
The risks associated with positional trading are distinct, though. The longer the duration of a trade, the more capital is required. Furthermore, overnight price gaps can be caused by events that occur during market closures.
Example:
Suppose a trader in India receives a positional call from their broker. The positional call meaning in this context is a recommendation to buy shares of Infosys with the anticipation that the stock price will increase over the next few months due to a major upcoming product launch.
Acting on this positional call, the trader buys 500 shares at ₹900 each. After four months, the price rises to ₹950 per share. The trader sells all the shares, making a profit of ₹25,000 (₹50 profit per share x 500 shares).
Key differences: Intraday trading vs position trading
Here’s a comparison table highlighting the key differences between intraday and positional trading:
| Factor | Intraday Trading | Positional Trading |
| Risk | High, due to market volatility and the need for quick decisions. | Moderate to high, mainly due to overnight risk and market gaps. |
| Investment Size | Can be small or large, depending on the trader’s capital and strategy. | Usually requires a larger capital due to longer holding periods. |
| Duration | Trades are completed within a single trading day. | Trades can last for days, weeks, months, or even years. |
| Stress Level | High, due to the need for constant market monitoring and quick decisions. | Lower, as trades are less frequent and require less constant monitoring. |
| Profit Potential | Profits are typically smaller, but can accumulate through multiple trades in a day. | Profits can be significant if the long-term view is correct, though it requires patience. |
| Time Commitment | Requires full-time attention throughout the trading day, monitoring market movements in real-time. | Less time-intensive, as trades are based on long-term trends and can be monitored less frequently. |
| Market Knowledge | Requires deep knowledge of short-term market movements and technical analysis. | Requires a broader understanding of market fundamentals and long-term trends. |
| Transaction Costs | Higher due to frequent trading and multiple transactions throughout the day. | Lower, as fewer trades are made, thus reducing transaction costs. |
| Liquidity | Needs high liquidity for quick entries and exits within the day. | Can work with lower liquidity since positions are held longer. |
| Emotional Impact | High emotional stress due to rapid decision-making and constant monitoring. | Lower emotional impact, though it requires patience and the ability to withstand market fluctuations over time. |
Choosing between intraday and positional trading
Several factors should be considered before settling on either intraday or positional trading:
Investment goals: Intraday trading could be a good fit for you if you aiming to make quick money and are willing to trade often. Consider positional trading if you want substantial returns over a longer time frame.
Risk tolerance: Because of market volatility, intraday trading carries a higher risk than overnight trading. Positional trading carries a high degree of risk and has the potential to generate substantial profits or losses in a matter of hours.
Time commitment: Positional trading gives you more leeway than intraday trading, which demands continual market monitoring.
Personal preferences: Your trading style should align with your personality, lifestyle, and financial goals.
Example:
The stock price of the company Reliance Industries Ltd, had a high of ₹2,978.00 and a low of ₹2,927.00 (as of March 11, 2024) indicating the profit/losses for the intraday traders. Whereas the stock price of the same company has come from ₹2438.85 to ₹2928.00 over 6 months (as of March 11, 2024) indicating the profit/losses for the positional traders.
Capital requirements in intraday vs positional trading
Intraday trading lets you start with less money thanks to broker-provided margin (leverage). Since intraday positions are closed by evening, brokers feel safe offering this boost.
In positional trading, you don’t get any such leverage – you have to put up the full amount for your trades. In essence, intraday lets you go above your ability with borrowed funds, while positional trading is strictly a “bring your own cash” game.
| Aspect | Intraday Trading | Positional Trading |
| Leverage available | Yes – e.g. 5× to 10× boost in buying power | No – must pay full amount (no leverage) |
| Starting capital needed | Low (₹10K–₹50K can be enough to begin) | Higher (typically ₹25K or more) |
| Funds for ₹50K trade | ~₹10K (with ~5× intraday margin) | ₹50K (full amount required) |
Risk factors in intraday and positional strategies
Here are few differences between both the positions in term of risk involved:
| Risk factor | Intraday Trading | Positional Trading |
| Market volatility | High intraday swings (rapid price moves) | Moderate swings (over days/weeks) |
| Leverage use | Yes – amplifies gains and losses | No leverage overnight |
| Overnight risk | None – no positions after market hours | Yes – overnight news can cause gap-ups/downs |
| Emotional stress | High – requires constant focus all day | Lower – less stress, but patience needed |
| Time commitment | High – full attention during market hours | Low – occasional monitoring only |
Bottomline
Every trading strategy, whether it is intraday or positional, comes with its own set of pros and cons. Consider your investing objectives, level of comfort with risk, and available time before making a final decision. You need to know your investments inside and out in addition to having a good trading strategy if you want to be successful. Best of luck in the market!
FAQs
It depends on individual preferences, risk tolerance, and goals. Intraday trading offers quick profits but requires constant monitoring, while positional trading offers long-term returns with less stress but carries overnight risk.
Yes, it can be profitable, especially with the right strategy, research, and patience. However, it requires larger capital and involves overnight risk.
Long-term trading is generally considered safer, as it allows for thorough research and avoids short-term volatility. Options trading can also be safer due to its risk management potential.
Profitability varies. Day trading forex can be more profitable for short-term traders, while long-term stock trading can yield higher returns for long-term traders. Profitability depends on knowledge, strategy, and risk management.
Stock trading is often recommended for beginners, as it’s easier to understand. Swing trading is also a good option for those with less time, as it requires fewer trades and less market monitoring.