People often ask questions on which style of trading is better, whether they should follow intra-day calls or positional calls and how they can make maximum profit with little risk in stock market.
Based on the style of stock trading we can classify it into three types: Day, Swing and Positional. This classification is done on the basis of time frame of the completed trades and profit expectations. So, before understanding positional trading we should know something about day and swing trading. The difference between the three is defined below:
- Day Trading: In this kind of trading the trader does not hold a position over night, he sells the shares on the same day he purchased them. This kind of trading is done keeping in view intra-day charts with a very short primary time frame like 3-minutes, 5-minutes, or 10-minutes. Their trade lasts from several minutes to several hours. Its better for those who can give full time to trading and want to earn regular income from the share market.
- Swing Trading: In Swing trading traders either buy today and sell tomorrow (BTST) or sell today and buy tomorrow (STBT). This is done based upon daily stock charts and trades can last from a day up to several days or few weeks. This is better for those who can not give full time in trading but still want to earn from share market.
- Positional Trading: This is better for those who are looking forward to create more wealth from stock market and do not want regular income from share market. In this kind of trading the trader has to see weekly chart and holding period of shares could last from 1 month to 6 months.
So based upon your trading style ie, whether you want regular income or want to invest in share market to create wealth and the profit expectation you can select your trading style as day trading, swing trading or positional trading.