If you are interested in investing in the stock market then you need to understand the basics of the stock market.
If you are open to learning, you will find a lot of interesting information about the trading mechanism. Out of all such mechanisms and concepts, one of the most common confusion is Intraday vs Delivery.
How these trading methods differ, what kind of trading suits you, what is your risk appetite, your return on investment expectations, holding period – a lot goes into it.
If a customer wishes to trade in the stock market, there are 2 types of trades wherein customers can trade.
What is intraday trading?
If an individual buys and sells shares on the same day during the market houses it is called intraday trading. In case an individual forgets to sell the position or buy (in case of short sell), the trades are executed automatically during the closing hours.
These are the two modus operandi to operate in the market.
The purpose, risk involved and capital required to vary in intraday vs delivery trading. In intraday trading securities are held for a very short period of time, i.e. a day, whereas in delivery trading the securities are held for a much longer period of time.
It is the trader’s choice whether to choose intraday vs delivery trading depending upon his intent of trading, risk appetite, capital available, and multiple other factors.
Many traders Do intraday trade by setting a price target for the stock and when the stock is below the target traders buy the stock and sell when the stock reaches the target. And if the traders feel that their stock will not reach the market before the market closes for the day, the intraday traders sell it at the best price possible.
Advantages And Disadvantages Of Intraday Trades
To understand the difference between intraday and delivery trading, you should know their pros and cons. Outlined below are some advantages and disadvantages of intraday trades.
Advantages Of Intraday Trades
Intraday traders use margin funds while taking positions. In this way, they do a larger trade while paying only a small amount upfront. Their broker provides the additional funds for the trade. Thus, the trader is able to have a bigger position than their capital would allow. This pushes up the potential for profit as well.
Since Intraday stocks have to be closed within a single working day so capital invested is held only for a few hours. So the traders can book up profits quickly due to price fluctuations.
Brokerage is less
In Intraday trading brokerage is less as compared to delivery trading.
No overnight risk
Since in intraday trading the trading is done before the market closes so the traders are protected in case the markets shift after hours. This may happen, for example, following the release of adverse news.
Disadvantages Of Intraday Trades
Risk of loss
There is a lot of risk of losses as if the market is adversely affected during the trading day then the trader could incur losses. These losses could be magnified if the exposure is high.
Constant monitoring can be stressful
Since to become a successful intraday trader, one must track market movements closely. The monitoring helps to identify the best time to enter or exit a position. But it requires some knowledge of technical analysis and can prove stressful.
No corporate benefits
Intraday traders don’t take delivery of any stocks. As a result, they do not own these assets. So, naturally, they do not enjoy dividend payments and other benefits like bonuses or rights issues.
If you buy shares today and sell them after 1 day then it is called Delivery Trading. By selecting Delivery Option, you can sell your shares any time after 1 year, 5 years or even more till the time you do not wish to square off your position.
Advantages of delivery trading
No time limit
Traders doing delivery trading can hold their stocks for as long as they like. Stocks can be holded from a few days to several months. In case a stock did not perform well in the short term, there is no need to book losses right away. If the stock is good, the trader could hold on for the long term
When buying shares for delivery, traders pay the full value of the shares upfront. So, if the trade does not go as planned, their loss is limited to the purchase price. In comparison, margin traders could face massive losses if their trade moves negatively.
By taking delivery of shares, traders become part-owners of the company. They become eligible to receive regular dividends and interest payments. They may also get other benefits such as bonuses and rights issues.
HOW DO INTRADAY TRADES DIFFER FROM DELIVERY TRADES?
Delivery vs intraday trading is one of the most discussed topics in the equity market. In case you are looking for a quick profit from share trading, then the intraday day is the right option to choose. But as an investor, you must look at long-term investment. You can select both options or concentrate on anyone depending on your goals as an investor. In case you are looking to perform intraday trading but do not know which stockbroker suits you the best you Click here or give us a call back at +917303205869.
Share market investing will help to grow your money in the long term. People used to invest in the share market to build their wealth in the long run. If you are scared of investing in the share market, then you are not alone. Individuals with very limited experience in the stock market are very scared of losing. If you are looking to grow your money by investing in the share market click here