Intraday Trading VS Positional Trading: Which one should you choose?

1. Intraday Trading

As the name suggests, intraday trading involves entering into new positions after the opening of market and closing those positions on the same day before the market closes. In intraday, you are bound to close your position at the end of the trading day, no matter it ends in profit or loss.

Intraday trading basically aims to make profit out of small market movements throughout the day. Intraday is widely practiced because traders can trade in large positions with a very small exposure and very high leverage. But in case of leverage based trading, you need to exit your position 15 minutes to 30 minutes prior to the market closing; else the broker automatically squares of all your positions. In case if you wish to convert your intraday position into delivery, you need to pay the complete amount for the same to the broker. All this should be done before the market closing.

Intraday trading is only suitable for full time traders as it requires you to be active in the whole trading session. The markets are highly volatile, once you miss out your target and your portfolio may start bleeding. The main advantage of intraday trading is high leverage. If you have made your mind to be an intraday trader, but you are worried about the market volatility and risks, Market Pro can help you. Market Pro is a bouquet of services from SEBI registered investment advisor CapitalVia, which provides quality intraday recommendations based on qualified research.

2. Positional Trading

Positional trading has gained huge popularity in the recent times because it eliminates the biggest risk of Intraday trading which is to square off your position at the end of the trading session. Positional trading allows you o hold your positions as per the need for one or more days, weeks or months. The time frame is not fixed and can be selected based on the nature of the trade.

Positional trade requires a higher working capital and more risk bearing capacity. Depending on your broker, you will roughly need 50% or more capital as margin just to carry future contracts overnight. The higher ranges of positional trading may lead to a higher stop loss risk. For example, you can use a 15 to 20 points stop loss for the intraday trade of a Nifty Futures Contract but for a long term positional trade you will be required to use a stop loss of 40-150 points.

So basically, you may have over 20 trades in a week with intraday, but with positional trading you will only be having 2-5 short term positional trades. Also, based on the stop loss, it is evident that the risk tolerance is almost the same and may be even lower with positional trading.

When you hold your position from few weeks to months it is known as long term positional trading. Due to the large trading ranges, here the risk levels of stop loss can go as high as 200 points and at the same time the rewards will also go higher up to 1000 points or even more. It is recommended to first get hands on with intraday and short term positional trading before stepping into the world of long term positional trading.

3. Which one should you choose?

Now coming to the most important question, which one is perfect for you - intraday trading or positional trading? Well, the answer to this depends on a number of parameters, the first one being the capital. If you have low capital affordability then you should definitely go with intraday as positional trading requires higher capital affordability. The second parameter is the risk bearing capacity. As discussed above, intraday is a high risk trade. If you can accept the high amount of risks incurred with intraday trading you should choose intraday else positional trading is there for you at slightly lower risks. The third and final parameter is the time. If you are a full time trader and keep yourself glued to the screen for the whole day, you should definitely go with intraday.

Trading and investing in the stock markets requires lot of experience and research. Whatever trade form you choose, there are risks associated with it. Intraday has the advantage of low capital requirement but requires a high risk tolerance level whereas positional trading requires higher capital but posses comparatively lower risks. If you are still confused, it is better to take the help of a SEBI registered investment advisor who will help you choose the perfect trade form for you based on you capital requirement and your risk tolerance.