Last Updated on January 31, 2024 by ethinos
As a trader in the Indian stock market, you can make use of different trading strategies to profit from share price movements. Two such popular strategies are swing trading and position trading. If you plan to trade actively in the stock market, it is essential to compare swing trading vs position trading, so you can decide which strategy to use and when to use it.
In this article, we’ll take a closer look at what these two strategies entail and the key differences between swing trading and positional trading.
Table of Content
What is Swing Trading?
Swing trading is a short-term trading strategy where you identify potential price swings in the market and attempt to capitalise on the resulting market momentum. The time frame for a swing trading strategy generally ranges from a few days to a few weeks. Some swing trades may be held for a longer duration, with a few months between the entry and the exit.
If you want to actively practise swing trading, you need to make use of technical analysis. This will allow you to evaluate historical price patterns and predict how the market may move in the near future. Once you identify a possible swing in the prices of a stock, you can take a position accordingly to benefit from the price swing — if it manifests.
What is Position Trading?
Position trading is more like an investment technique rather than a trading strategy. Here, you buy and hold shares or securities in your portfolio for a longer period — typically several years — in order to benefit from long-term price gains. Unlike swing trading, position trading does not focus on short-term market volatility or price fluctuations.
To become successful at position trading, you must get better at performing fundamental analysis rather than technical analysis. This will help you select stocks or securities that are currently undervalued and may experience a rise in price in the future.
Swing Trading vs Position Trading: The Key Differences
Now that you know the meaning of both these trading strategies, you will find it easier to gauge the main differences between swing trading and positional trading. The table below encapsulates these differences.
| Particulars | Swing Trading | Position Trading |
| Duration | Typically days to weeks | Ranges from a few months to several years |
| Objective | To profit from short-term and medium-term price swings | To profit from long-term price movements |
| Frequency of trades | More trades conducted over a shorter period | Fewer trades conducted over a longer period |
| Analysis techniques | Mainly technical analysis | Mainly fundamental analysis |
| Market monitoring | Requires regular market monitoring and trade adjustments | Requires much less market monitoring due to its ‘buy and hold’ approach |
| Risk exposure | Higher exposure to overnight risks and market gaps over weekends due to shorter trading timelines | More exposure to long-term market risks |
| Capital required | Can be done with lower capital infusion | May require higher capital infusion to withstand long-term fluctuations |
| Profits expected | Smaller and more frequent gains are expected | Larger gains over a longer period are expected |
Swing Trading vs Position Trading: Which One Should You Choose?
Swing trading and positional trading are two very different strategies, each with its own unique advantages and setbacks. By understanding the differences between swing trading and positional trading, you can make a better choice about which technique to use.
Ideally, swing trading may be suitable for you if:
- You have a short-term outlook for your profits
- You want to make use of after-market orders
- You have experience with using technical analysis
- You can afford to make high-risk trades
- You do not want to lock up your funds over the long term
- Your portfolio can withstand short-term market volatility
On the other hand, it may be better to use position trading if:
- You are comfortable with a long-term trading outlook
- You are experienced in fundamental analysis
- You want to make low-risk trades
- You want to take advantage of long-term price appreciation
- You do not want to monitor the markets round the clock
- You want to ride out short-term market volatility
Conclusion
Now that you know the differences between swing trading and positional trading, you can make a more informed judgement about which strategy aligns more with your current financial goals. The best part is that it does not always have to be swing trading vs positional trading. You can make use of both these strategies to fulfil different goals.
Swing trading can be more beneficial for short-term and medium-term financial targets, while positional trading may be more suitable for long-term milestones. To ace these two strategies, however, you must get better at both technical analysis as well as fundamental analysis. Additionally, you also need to align these strategies with the right financial goals, so short-term profits can be utilised for short-term goals and long-term gains for long-term targets.
