The lucrative feature of the trading world entices every individual to multiply their capital by engaging in it on a regular basis. If you want to bank on its benefits, you cannot be a spectator observing from the periphery of this world. If you are not ready to take the leap of faith, don’t fret as you just need the right knowledge and guidance. Hence our SEBI-registered research analyst, Ashutosh Bhardwaj is sharing his expertise here, explaining the basics of Intraday Trading and Swing Trading, so you can have a better idea of how to invest smart.
What is Intraday Trading?
It is basically the buying and selling of stocks, bonds, futures, commodities, and other financial instruments. In general, all those monetary assets that help make profits from the movement of price within a single trading day. A number of positions are considered throughout the trading day, varying from seconds to hours, and every single one of them is closed at the end of the day to mitigate risk exposure.
Although day trading or intraday trading can be performed by anyone and everyone, it certainly needs a sheer amount of time and effort to keep a sharp eye on not just the positions but also technical indicators. This vigilant monitoring helps in determining the right time to exit from the money market. Opening multiple positions in the market is one of the reasons why traders and trading enthusiasts make sure to keep their costs at a minimum. As they are not subjected to overnight funding fees, they tend to hold these positions overnight.
Pros of Intraday Trading
- Low Capital Works Just Fine: If you are a trading aspirant with limited funds, this is the ideal way to start your trading journey. Intraday trading is the perfect trading mechanism to start with a small amount of capital which other trading strategies don’t facilitate.
- Some More Flexibility: A buyer, seller, broker, agent, dealer, or anybody can choose any time of the day for day trading, suiting their availability during the day and time to implement the strategies as per their knowledge.
- Prompt on the Profit: You benefit from even a slight price movement if you are acquainted with the effects of intraday trading. If you are able to identify and implement the right opportunity at the right time, you are made for it.
Stress Less: If you are into intraday trading, you are least likely to experience the stress of overnight fluctuation of the market. Closing your positions at the end of the day relieves you of all your worries and you can simply relax before hitting the bed at night.
Cons of Intraday Trading
- Higher Risk: The unpredictable nature of this type of trading makes it a risky affair. Being of the unstable characteristic, its price fluctuations can shock you in unexpected ways. It is also common for traders to lose a lot of capital in a very short span of time.
- Diversification Deficiency: As traders tend to keep their eyes on limited assets in the market. It eventually gives rise to a lack of variation in their portfolios, amplifying risks for the traders.
- Time-Consuming: To bank on the profits of intraday trading, one needs to constantly monitor the market and assets, which everyone knows is a time-consuming process as traders need to make timely decisions.
Less Learning Opportunities: If you are looking forward to skill development and long-term learning, intraday trading is not your cup of tea. You may or may not get an opportunity to scrutinise market trends or acquire a deep understanding of the market
What is Swing Trading?
Swing refers to the fluctuation of prices in the market in relation to stocks, commodities, and currencies. It may take from a few days to a few weeks for it to sort out. With the aim to grab hold of swings in the financial markets that vary from short to medium-term price swings, swing trading involves traders holding their positions for a few days/weeks, depending upon price movements which may benefit these traders sooner or later. Moreover, a swing trader may not make trading his/her full-time career, like intraday traders.
Pros of Swing Trading
- Flexibility to Trade: Unlike intraday trading, you do not have to keep a constant eye on the market to observe and react to one and each price fluctuation. One can also execute other jobs on the side other than being engrossed in the financial market.
- Less Upfront Investment: You don’t need state-of-the-art technology. One computer screen and other standard trading tools are enough to get started and keep going.
- More Scope of Gains: Swing traders intend to focus and bank on transitional price movements, which boost their chances of significant profit potential.
Technical Analysis: This method turns out to be quite prolific when it comes to recognising and segregating entry and exit points, on the basis of past price patterns, chart indicators, and trends, to name a few.
Cons of Swing Trading
- Less Exciting: As the traders involved in swing trading need to be less attentive, he or she may get bored easily because of the lack of excitement in the field. Its slow speed and more methodological approach give one no thrills.
- Overnight Risk: In case you are holding positions overnight, you are more exposed to overnight gaps, and when the market opens, you will witness that the entire scenario has changed as compared to the previous day’s close. You might miss some profit in between.
- Psychology and Sentiment: To be precise, market psychology and sentiment that can adversely affect swing trades. When the market sentiment shifts all of a sudden, it not only leads to unexpected price movements but also brings many challenges for the traders.
- Deep Understanding: To master the art of swing trading, its aspirants continuously need to build their strong base of technical and/or fundamental analysis. For that, you can enrol in Logical Nivesh Academy’s online course on Technical Analysis to sharpen your analytical skills.
With more clarity about two significant areas of trading, i.e., intraday trading and swing trading, now you have a clear base and a better understanding of how you can trade in which domain. To get your hands on professional expertise, enrol in online courses offered by Logical Nivesh where our SEBI-certified research analyst will guide you through every corner of the money market. Time to get started with your trading career!