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Five Differences Between Intra Day and End of Day Trading Strategies

Updated on 2013-06-29 by Guest

Though trading had proven to be an efficient way of investing the hard-earned money to earn better profits, it had always been on the minds of common people that it would require longer hours in front of the screen to decide on the strategies. While this requirement is actually true for intraday trading strategies, end of day trading is less complex and less difficult with minimal requirements of time. Intraday trading requires that the traders enter and exit the market right on the same day, irrespective of whether they had earned profit or lost in the market. On the other hand, end of day trading does not impose the requirement and allows the traders to enjoy the pleasure of trading as and when they need.

There are few major differences between intraday trading and end of trading, both of which are commonly practiced by the traders in the market. Some of them are based on the time of entry and exit, volatility involved in the market, requirements of time to be spent on trading and the like.

1. Time Requirements

It had always been a concern that playing in the capital markets would mean foregoing all other jobs to just sit before the trading screens all day to decide on the stocks and number of shares to trade on. This is however not true if you plan to adopt end of trading for your investments. While intraday trading requires that you determine the entry point in the market, take a position in the stock and continuously monitor the same for the entire day so as to exit at the right time to earn profits, all these requirements are totally wiped off in the end of day trading.

You can in fact keep your day job intact and stay with peace of mind all day when you are into end of day trading. This method of playing in the market just requires that you do your homework every day for maximum of one hour after the market closes. It is just necessary that you work out your trading plan effectively and look into the market for signals which support your plan. If the signals are positive, then you submit your trade orders and go to sleep without any pressure.
On the other hand, if there are no positive signals to match your plan, you may simply stay away from the market for that day. As it is very clear, end of day trading is done only after the market closes and could thereby be done at your own comfortable time till the market opens for the next day.

2. Volatility and noise

As end of day trading is done after the market closes, there is less volatility and noise involved in observing the charts of the shares. For an intraday trader, all his charts for the day would be filled with heavy clutters making it highly difficult for the player to concentrate on his positive signals.

On the other hand, end of day trader will just have to focus on how the market had moved for the entire day, the major trend of the day and on how the market closed for the day.
You would just need to look at the closing prices of the stocks for the day and if there are any news coming up for the stocks which favor further price movements in the shares. Once such signals are trapped, you may just enter your trade and keep your mind at peace until the market closes for the next day. Thus end of trading is totally free of noise and clutter relative to the intraday trading strategies.

3. Time of Entry and Exit

While an intraday trader would completely play during the market hours, the end of day trader would be into the market only after it closes. Further, it is mandatory that in intraday trading, the investor will have to exit his positions in the market right on the same day before the market closes.

This is not the case of an end of day trader, who can wait to watch how his position had moved for the next day and then decide whether to exit the trade or continue for the next day too.
In addition, an intraday trader would be continuously playing in the market for the entire market hours with various long and short positions. On the other hand, the end of day trader would just spend one hour and place one set of orders in the market to register his profits for the next day.

4. Return efficiency

An intraday trader puts in all those strenuous efforts and pressure mounted timings to earn his profits from the market before it closes for the day.
On the other hand, an end of day trader would book his profits from his trades just by putting in one hour for the entire day. His return efficiency is so much higher than an intraday trader, when the time spent on trading is considered.

In addition, an end of day trader can always keep his day job intact while he also secures the profits from trading. An intraday trader will have to spend his entire day focusing on those cluttered movements in share prices with heavy fluctuations.

5. Choices to the trader

An end of day trader will just have to decide whether he will have to make a trade or not for a day. If he observes positive signals to suit his trading plans, then he would choose to trade for that day or else just keep calm without any actions. On the other hand, an intraday trader does not have this choice.

An intraday trader will have to book his daily profits and will thereby have to enter into trading every day. And once he enters into the trade, it is mandatory that he completes the trade by exiting his position the same day as is set by the regulatory requirements.
It is thus not essential that an intraday trader books his profits by end of the day, which is in effect assured for an end of day trader.

All such factors seem to make end of day trading much more attractive and less risky compared to intraday trading.

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Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.