Traders employ a wide range of strategies to generate profits by capitalizing on the price movements of assets. Two of the most popular strategies that most traders gravitate towards are intraday and positional trading.  Â
The objectives of these two strategies remain the same: to profit from market fluctuations. However, they differ vastly in all other aspects, ranging from time horizon to risk profile. As a trader, you must understand these distinctions if you wish to make well-informed trading decisions.Â
In this article, we are going to dive into each of these two trading approaches separately, compare positional trading vs. intraday trading, and determine which of them is more suitable for you.Â
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Positional trading is a strategy where investors enter into a position in a financial instrument and hold it for a long period of time. Depending on the investor’s preference, objectives, and time horizon, the holding period for positional trades can last anywhere from just a few days to even months or years.Â
The primary objective of positional trading is to capitalize on longer-term trends in an asset. Investors who adopt this approach tend to rely heavily on fundamental analysis to unearth good-quality stocks with strong future growth potential. Since the focus is on capturing larger price movements rather than short-term fluctuations, this strategy requires patience, a sound understanding of trends and market dynamics, and the ability to withstand short-term volatility.   Â
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Also known as day trading, intraday trading is a faster-paced trading approach compared to positional trading. Here, traders open and close positions in an asset within the same trading day. The primary objective of this strategy is to profit from the short-term price movements that occur throughout the day.
Traders who adopt this approach must constantly monitor the markets, make decisions quickly, and execute trades rapidly. They rely primarily on technical analysis, price charts, indicators, and candlestick patterns to identify potential trading opportunities. Additionally, traders also pay close attention to news events, market sentiment, and order flow, all of which have the power to impact the direction of the market in the short term. Â
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Now that you are aware of the meaning of intraday trading and positional trading, let us now compare the two approaches to see how they differ from each other.Â
The most obvious difference between intraday and positional trading is the time frame of the trades. Intraday traders open and close positions within the same trading day, often holding trades for just minutes or hours. Positional traders, on the other hand, hold onto their positions for days and even months.Â
Intraday trading exposes traders to far higher levels of risk and short-term volatility compared to positional trading. Although positional trading is not completely immune to volatility, it allows traders to tide over short-term fluctuations and focus on broader market trends.Â
Most stockbrokers offer leverage for intraday trading. With leverage, traders can enter into much larger positions by simply depositing a small amount upfront. The use of leverage can lead to lower capital requirements and higher returns but also increases the risk of significant losses if the market moves unfavorably. Positional trading, meanwhile, typically requires more capital since traders must deposit the entire amount upfront to initiate a position.Â
The frequent buying and selling associated with intraday trading often results in higher transaction costs. Positional trading, however, typically incurs lower transaction costs over time due to its lower trading frequency.
The profit potential per trade is quite low for intraday trading since the primary objective of the strategy is to accumulate small profits from numerous trades. The profit potential for positional trading is much higher as traders look to capture large price movements.Â
Intraday trading requires traders to constantly pay attention to the market movements to ensure that they do not miss out on potential opportunities. Positional trading, comparatively, is more relaxed and does not require traders to focus too much on short-term market movements.Â
Assets must be highly liquid with strong market participation for intraday trading. This ensures easy entry and exit for traders. Positional trading, meanwhile, is not constrained by high liquidity. Traders have the flexibility to consider a wider range of assets, including those with lower liquidity.    Â
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Now that you are aware of the differences between intraday and positional trading, which one of the two approaches should you choose? Here is a quick guide that can help you determine the ideal strategy for you.Â
Positional trading may be suitable for you if you prefer a relaxed trading approach with lower time commitment and greater gains. Intraday trading, on the other hand, may appeal more to you if you thrive in highly risky, fast-paced environments and can dedicate a lot of time to trading.Â
Ultimately, the choice between intraday and positional trading should align with your financial goals, trading style, risk tolerance, and time availability.Â
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Both intraday and positional trading can be highly successful with the right approach. As a trader, you must consider the benefits of intraday trading and positional trading along with the risks posed by both of these approaches when choosing between the two.Â
That being said, irrespective of which approach you choose, you must ensure that you do thorough research before you trade. Motilal Oswal’s Research 360 platform offers multiple tools and features designed to help you fundamentally and technically analyze various stocks. In addition to stock analysis, the platform also keeps you updated on the latest market-related news and announcements. Sign up for Research 360 today and experience the full gamut of features.   Â