Intraday Versus Swing Trading

Aug 20, 2021

Brijesh Bhatia, Research analyst

Should you trade intraday or are you better off with swing trading?

This is a topic that confuses many new traders and I know why. Many new traders struggle to find their way in the markets when the get started.

They usually jump between different styles, trying to get a grip on trading.

Fortunately there is a simple way to decide between these two trading styles. In this video, I'll tell you all about it.

Let me know your thoughts on this topic. I would love to hear from you.

Hello viewers. Welcome to the Fast Profits Daily. Myself Brijesh Bhatia.

As you've seen in the title that it's difficult to choose between intraday and swing trading and most of the traders fail to do so. The end up losing huge money in terms of loss. Then they shift onto the different strategies. Intraday doesn't suit them. Swing doesn't suit them. They come back to the investing.

Well, I want to discuss some of the points, which is very, very important for you to judge yourself on intraday, on a swing trading, and what are the key problems, which these traders face and how you can work on this.

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So you have to first understand, what is your type of risk profile. I would say what kind of trader are you? Are you a full time trader? Then I would say yes look for intraday trading but if you are working somewhere, if you have your own business, don't get time from 9 am to 3.30 pm if you're trading equities, if you're trading commodities, 9 am to 11:30-11:45 depending on the winters.

So you need to discuss you need to think that am I able to give the time to the markets because if we're trading intraday, you need to be on toes right from the start of the markets, and that is very, very important.

Well I'll come on to the how to overcome this problem as well but you need to think. Am I at the right time when the trades are coming out? Am I at the right time in front of the screen when I want to exit the trade? So these are very, very important in terms of intraday trading.

But when you are trading swings, 15 minutes plus minus, a couple of rupees plus minus on the trade doesn't matter but when you're trading intraday, time is value. You need to enter the trade at 9:15-9:30 whatever strategy and by the time 3-3:15 pm, you have to exit the position depending on the broker's risk rules.

So by the end of the day, you need to exit the position whether market goes up, markets goes down, markets remains sideways for the day. So you need to be into the right trade, into the right stock, and you need to look for a momentum. So you can't sit by in intraday trading.

But when it comes to the swing trading, if you're buying on Monday, the stock is not going on the Tuesday, you still have Wednesday, you still have Thursday, you still have Friday. So you need to understand. Swing trading is basically you buy today, hold it for two days, three days, to one week to 10 days and you exit your positions. But in intraday you need to square up 3-3:15, depending on what brokers allow you.

So you need to keep in mind that the time varies over here when it comes to intraday trading. You can overcome this. In case you don't have time, you're not a full time trader, you're doing part time trading you can hire professional advisers who can recommend trades to you.

But again, there in case you are receiving calls on WhatsApp, e-mails whatever your communication, you we need to execute those trades. So you need to keep a watch. Even in intraday trading if you're hiring a professional traders, professional research providers, you need know that when the trades are coming, you are punching the trades because here, the price fluctuations, we term it as slippages in terms of trading. So slippages are basically when your system has triggered a buy and you enter the trade. The difference between the two sometimes it can be in your favour, sometimes it can be not in your favour.

Second most important factor is leverage. Now most of the brokers here leverage onto the intraday trading. Though I know there are some of the SEBI rules which are coming into the place of leveraging but still there are some ways were broker gives you that in intraday trading. When it comes to swing trading, you need to have that capital. So my third point would be with leverage you need capital. So you need to think about the kind of capital you're deploying.

So there are various strategies. Again options selling, then the margins are required. Options buying, the premium needs to be paid. Futures, again you have to pay the margins. So you need to think what kind of capital I'm coming with and the necessary leverage if you take, it is beneficial for you.

So end of the day brokers offering you leverage doesn't mean that you can be the king of the trading and take the leverage. At the end of the day, it should be a win-win for both. There is no free lunch brokers are providing you. So at the end of the day, when they give you leverage is they are earning brokerage. They are earning interest if you are looking for swing trading. So it is a win-win for both.

So you can't think that okay, I am getting leverage and I'll be using the leverage while trading and I'll be leveraging all the trades. So you need to keep in mind what kind of capital you are bringing on to the table.

Intraday trading requires if you're looking for a leveraged brokerage, then capital might be lower but if you're trading swing, you need to keep the total amount of margins, m-to-m etc if you are trading futures.

Now, coming onto what BTST we used to do initially. Now BTST has been stopped by SEBI but what the BTST used to do is we used to buy today and sell tomorrow in cash. So that has been stopped. In case you're not trading futures and options, keep in mind that there are some rules T+2 to get a delivery when to sell. So you need to keep it in those when you're trading swing into the cash markets That is also very, very important.

Fourth point. With the time, with the leverage you have, the leverage you're getting, the capital you're getting, the fourth is most important - Strategy. Once you think that I want to do intraday, I want to swing training, what kind of capital I have, what kind of leverage I'm getting, the strategies should be defined using these three parameters because it is very, very important.

So, as I said, if a starting with Rs 1 lakh looking for futures, no broker will provide you with swing trading. You might get intraday considering the amount of leverage you're getting but swing trading, margins are ranging between 1.5 to probably 2, 2.5 lakhs onto the lot size. Nifty is around 1.2-1.3 lakh. So still you need to think in mind that come starting that if I'm starting for around 75,000-100,000 rupees, will I be able to do futures? Yes or no? If yes, if you have capital, then you need to think that kind of strategies.

So strategy here play an important role. In case you want to refer some of the strategies, I have done proven trading set ups video series of around 9-10 videos. You can refer. There I have discussed various technical set ups, various theories which will really help you out defining your strategy.

Most important here the psychology plays an important role. Now say you bought a stock XYZ at Rs 100 at 9:30 am. If you're trading intraday, 11:30-11:45, the stock is not moving. Now, two hours, 2.5 hours, if stock is not moving and when you're playing intraday here, time is very, very important. Now if your stock is not moving in the positive side or negative side, it's hovering in the same rate at where you bought, you are losing an opportunity.

That will not impact much for swing trading because he has capital, his strategy is defined in such a way that he can hold for two to three days, so here two hours, 1.5 hours, three hours of a slack time I would say generally, which is for swing traders doesn't matter. But for intraday trader it is a big, big difference because you are losing the other opportunities. So you need to keep in mind the psychology aspect as well when you're trading.

What happens with intraday traders is they jump onto the one trade to another in case the stock doesn't move. So you need to select stocks for intraday trading. Say for example, if you're trading intraday, I would prefer slightly mid to high volatile stock. You don't look for a stock which doesn't move intraday.

For example, I would say Reliance. It just moves around 10-15 points or probably 20-25 points intraday. Are you happy with those 20-25 points? Then look for Reliance. TCS generally moves for 15-20 points, 30 points, less than one percent. Are you okay with less than 1% move? Go for it.

So I will just look at the stocks, which has a capacity, an intraday volatility of 2-2.5%, probably 1.5% more than 1.5% because here I'm knowing that the stocks, out of 22 trading sessions in the month, in 15-16 days it will give me a momentum of 2-2.5%. So here I have an opportunity to gain 1-1.5% in a day depending on what kind of strategy I'm using but if the stock's average range for the day is 1-1.5%, there you're entry and exit will be very, very important. So you ned to keep those parameters in mind as well.

Most of the psychological aspects come when I am doing intraday trading. It should be in line with Nifty. Well, it depends upon the market cycle. When markets are falling, all stocks will fall. When market is rising, it doesn't mean that all stocks will rise because generally the quantum of the fall is faster than the quantum of rise.

Sometime market trades in a range like we had in June-July. Markets were trading in a range. But if you look at the stock momentum, it was amazing. Midcap were rallying. So you need to choose those stocks and parameters, where you look for intraday opportunities.

For swing trading is doesn't matter because in swing trading it matter that what you're looking for is 4%, 7%, 10% move and if you think that the setting trading set up is very well for 10% in swing trading weather it's coming intraday or it is coming 3-4 days later but if you're finding an opportunity then you should look for a swing trading. But yes, in intraday psychology aspect of stock selection is very, very important. So you need to keep a watch on that.

Generally, what most of the traders fail into the psychological parameter where stocks are not moving they get frustrated because when you see that you shortlisted a stock out of 5-7 stocks at the start of the day, you bought one stock and other three are moving. So you feel that okay, I have bought the wrong stock. The psychology aspect is there. Probably second half of the day, the stock might move.

So I would say generally for intraday trader, what I would suggest is look for three opportunities or divide your capital into three stocks where you get three opportunities during the intraday time. If one is not moving, you have two options to play out where the funds can be allocated. So keep a watch on those kind of strategies that you can develop. For swing that will not matter much, but there are some of the risk parameters which I've covered in previous videos as well.

So just to summarise. 3-4 aspects you will need for intraday versus swing trading. First is the time you can devote to the market. Second is the leveraging. Third is the capital. Fourth is this strategy and fifth, most important, is psychological. So you need to think on what kind of trader you are and define yourself, strategise in the manner where you can have a clear focus on either intraday for swing. So you can't do both because both requires different mindsets, different stock selection, different strategies and there are various aspects to it.

So just before signing of, I'll request in case you haven't subscribed to my Telegram channel there is a link below in the description. Click onto that subscribe to my Telegram channel where I share various charts on the index, commodities, bitcoins, cryptos where I think the opportunities can be there. Do like this video in case you think that this is really helping you out and comment in case you think any topic I should cover in the next video.

Signing off. Brijesh Bhatia. Thank you.

Warm regards,

Brijesh Bhatia
Brijesh Bhatia
Research Analyst, Fast Profit Report
Equitymaster Agora Research Private Limited (Research Analyst)

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