Q&A_ Why positional trading is easy as compare to intraday?
I have often heard and experienced that intraday trading is tough as compare to positional or swing trading. Let's figure out why...
1. Because about 90% of Indian traders are buyers: Yes, you’ve heard it right. Shorting is common in western markets but, as Indians, we love going long.
2. You cannot "short" in positional trades (Cash): You have to "buy" in cash markets. You can’t short, therefore the crowd makes the price move upwards more often whereas, in intraday, you can short very easily.
3. The Algos: Higher time frames are comparatively easy to trade (For eg. 1 day or 1 week), whereas, smaller time frames used in intraday (like 1 minute, 5 minute or 15 minute) are full of “bots” or say “algos” and definitely you can not compete against algos.
4. The big picture: In the long term, as our history reveals, the market always goes upside (due to inflation, interest rate or corporate bond yields up down, etc.). Therefore, suppose if you’ve bought any share, you don’t have that much pressure to sell your stock, resulting in much of the trades ending in profit.
5. The margin: Big Intraday positions can be taken with the "extra margin" provided by the brokers. Well, it's a "double edged sword". It increases your profit as well as "loss" potential. Smaller capitals are easily wiped out in pursuit of big profits.
Conclusion: Since the emotional quotient is hugely required when trading the markets (especially in intraday trading), in the shorter time frames (or say intraday), the algos make it worse for “Human” traders due to “emotional” factor. Avoiding intraday trades and switching to Positional or Swing Trading is best for newbies.
Terms explained:
(i) Intraday: The trades which are opened and closed in a single day i.e. (before 3:15 or 3:20 PM). The newbie traders opt for this as it provides leverage to trade.
(ii) Positional or Swing Trade: The shares bought with full cash. The trade which remains open from days to weeks or months, is called Positional or Swing Trade.
Disclaimer: This article, by any means does not indicate that you should start trading in the markets. Proper knowledge and risk assessment is crucially required for being successful in this field.
1. Because about 90% of Indian traders are buyers: Yes, you’ve heard it right. Shorting is common in western markets but, as Indians, we love going long.
2. You cannot "short" in positional trades (Cash): You have to "buy" in cash markets. You can’t short, therefore the crowd makes the price move upwards more often whereas, in intraday, you can short very easily.
3. The Algos: Higher time frames are comparatively easy to trade (For eg. 1 day or 1 week), whereas, smaller time frames used in intraday (like 1 minute, 5 minute or 15 minute) are full of “bots” or say “algos” and definitely you can not compete against algos.
4. The big picture: In the long term, as our history reveals, the market always goes upside (due to inflation, interest rate or corporate bond yields up down, etc.). Therefore, suppose if you’ve bought any share, you don’t have that much pressure to sell your stock, resulting in much of the trades ending in profit.
5. The margin: Big Intraday positions can be taken with the "extra margin" provided by the brokers. Well, it's a "double edged sword". It increases your profit as well as "loss" potential. Smaller capitals are easily wiped out in pursuit of big profits.
Conclusion: Since the emotional quotient is hugely required when trading the markets (especially in intraday trading), in the shorter time frames (or say intraday), the algos make it worse for “Human” traders due to “emotional” factor. Avoiding intraday trades and switching to Positional or Swing Trading is best for newbies.
Terms explained:
(i) Intraday: The trades which are opened and closed in a single day i.e. (before 3:15 or 3:20 PM). The newbie traders opt for this as it provides leverage to trade.
(ii) Positional or Swing Trade: The shares bought with full cash. The trade which remains open from days to weeks or months, is called Positional or Swing Trade.
Disclaimer: This article, by any means does not indicate that you should start trading in the markets. Proper knowledge and risk assessment is crucially required for being successful in this field.
Comment:
6. Capital risk and survival: Holding onto your losing positions (especially leveraged intraday trades), can easily wipe out your accounts. Well, in positional trades, you can buy up to the cash available in your account resulting in less capital dent as compare to intraday trades as well as longer survival in the markets. You also don't have any time limit or pressure to square off your order.