@ThePrestige here to talk about the advantages and and disadvantages of position trading vs. intraday trading.
Let’s start with a simplified definition:
POSITION TRADING: that trading method is used when the trader is going to make a decision within a given context or certain criteria while INTRADAY TRADING is strictly mechanical.
Sounds nice, so let’s get more in depth
A Position Trader is going to hold his position for a long time frame (from months to years). This type of trader usually looks at weekly or monthly charts, and he would not be concerned with short-term fluctuations as he believes that the primary trend will smooth these out. It’s really a safe way of investing with a relatively “small” amounts of capital.
DISADVANTAGE OF POSITION TRADING
If you think that by practicing position trading you will get to live where you want and get rid of those annoying bosses who have been bugging you for years then you are totally wrong because your trades might take months and the profitswill only barely be able to cover your cost of overhead.
Day Trader: This type of trader is more skilled and flexibleas Intraday trading requires experience – lots of it – especially focusing on order entry techniques and a deep understanding of exit points as he is trying to make profits from a small change in prices with rapid trades during the trading day.
And usually he tries to close all his positions before the market closes and doesn’t leave any open positions overnight. Intraday traders base their trades on strategies such as Swing trading, arbitrage, candlestick patterns and trend lines.
As I mentioned before, they attempt to profit from small – short term – movements so it would be difficult to earn large sums without large amounts of investment capital or the use of high leverage. These traders also spend a lot of money on commissions so they must gain enough from their trades to make profits after commissions.
Day Trading is also known as “the get rich quick strategy” and the biggest advantage of this trading style is that you can have many more trading opportunities than a position trader.
DISADVANTAGES OF INTRADAY TRADING
You need a lot of experience and very precise execution.
You need to dedicate most of your time to trading and trading related activity, and that time is going to be difficult and stressful.
It’s very simple, “Social trading” now offers an awesome chance to find skilled and experienced traders from all over the world that you can follow and also copy their trading activities without spending so much time in front of your computer and without the stress of intraday trading.
All what you have to do now is to choose a good trader, test his trading results on your demo account and then decide if he is suitable for you to copy or not.
And I think every trader also should have at least one long-term trade on his account just to get the benefit of both position and intraday trading, and also to reduce the severity of the crisis if the intraday system fails.
What do you think? Are you a position trader or more of an intraday trader?
Please share your feedback here or on my OpenBook wall.