Intraday Trading v/s Delivery Trading : Which is better?
There are two types of trading in the Indian stock market: intraday and delivery. Intraday trading refers to buying and selling shares on the same day. On the contrary, delivery trading allows investors to hold shares for a more extended period, depending on their preference, without the requirement of buying and selling them on the same day.
Published on 08 January 2024
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Investors or traders who do not prefer to invest in the market for the short term opt for delivery trading. In contrast, those who do not want to carry a position and are ready to take some risks by buying and selling on the same date can go for intraday trading. After analyzing the market trends, a trader can choose the best intraday stocks for today. The market is extremely contingent on intraday trading. Even buying the best intraday stocks cannot deliver the best possible outcomes. Let's understand both of them in detail:
Types Of Trading
There are two most common types of trading.
Intraday Trading
Buying and Selling of Shares happen on the same day.
Your broker will automatically square off your position if you do not sell your shares 15 minutes before the market closing time.
The motive is to make quick profits within the day.
One can buy first and sell at a profit or loss or sell first and buy at a profit or loss on the same day.
There is no holding or transfer of shares to the Demat account until the next day.
Your broker may charge a nominal fee for closing your account if you fail to do so.
Intraday trading involves more risk.
Traders should do market research before deciding their intraday trading strategies. After thoroughly analyzing the market, traders can choose the best intraday stocks to buy today. However, it is unpredictable when analyzing market volatility.
Understanding Trader's Perspective
Most traders who go for intraday trading set a target price for a stock. If the stock touches the target price, the broker automatically buys the shares for the trader. The trader then sets a target price. If the share touches the target price, the trader sells the shares before the market closes. The motive behind intraday trading is to make quick profits within a day.
Traders also place a stop loss to exit automatically from the market if the market reacts differently than expected. The broker sells the shares when the shares hit the stop loss.
When a trader expects the stock price to rise, he will buy the share at a lower price, take a long position, and earn a profit by selling it at a higher price before the market closes.
On the other hand, if he is bearish about the market or expects the stock price to fall, he will sell the share at the higher price first and buy the stock when the price falls on the same day to earn a profit before the market closes. However, there is an equal risk of losing money if market movement differs from the trader's expectation.
Advantages of Intraday Trading
Traders are allowed to short-sell
Traders are allowed to buy shares on Margin
Traders can catch the early price trends
Disadvantages of Intraday Trading
There is a limited time frame to trade the shares
Traders do not receive benefits of Dividends, bonus, or shareholder rights
Shares are required to be monitored closely.
Delivery Trading
Buying and Selling of Shares do not happen on the same day. The shares can be sold at any time in the future.
Your broker will not square off your position before the market closes, and the holding of shares will be transferred the next day.
"Buy Today, Sell Today" trades can also be delivery trades. When the trader buys shares on day one, the shares are transferred to the trader's account after two business days. Similarly, when the trader sells shares, they get debited from the trading account after two working days.
Shares can stay in the Demat account for days, weeks, months, or years. Traders can enjoy complete ownership of the stocks.
Delivery Trading involves less risk.
Trader's money gets blocked until he decides to sell his holdings.
Understanding Trader's Perspective
Delivery traders also set the target before placing their trades. However, since they hold the ownership of the shares, they do not hurry to close the trade on the purchase date. Since the trader has no compulsion to square off the active positions within a trading day, the chances of incurring the loss are reduced. Even if your share price falls, a trader can hold the shares for as long as he wants until the share price rises.
Advantages of Delivery Trading
Traders can hold stocks for long-term
It is comparatively a safer option than intraday trading
Traders can enjoy the benefits of Dividends, bonuses, or shareholder rights if they hold the shares for a longer term.
Disadvantages of Delivery Trading
Traders are required to hold stocks for the long term.
The trader's funds get blocked for two days after buying or selling the shares.
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Volatility Index: What is it and its Impact on Equity Market?
A lot of traders and investors, no matter how experienced they may be, fear the market at times, and for a very good reason too! The market is known to fluctuate in a volatile manner, leaving many participants with heavy losses, at least once in a while.
This can sound quite amusing! What are the steps to make profits in intraday trading? There are no set rules for making constant profits, and there are times when we tend to do all the right things, yet we face losses. But intraday trading is all about how you manage the risks and returns by using logic and trading charts.
India Vix Trading: Things that Volatility Index Indicates
Whether you are new to the stock market or have been around for a while, you may have come across several trading tools and indicators. And if you have been trading futures and options, then VIX or the Volatility Index is one such term that most traders and investors are familiar with.
Volatility Index: What is it and its Impact on Equity Market?
A lot of traders and investors, no matter how experienced they may be, fear the market at times, and for a very good reason too! The market is known to fluctuate in a volatile manner, leaving many participants with heavy losses, at least once in a while.
This can sound quite amusing! What are the steps to make profits in intraday trading? There are no set rules for making constant profits, and there are times when we tend to do all the right things, yet we face losses. But intraday trading is all about how you manage the risks and returns by using logic and trading charts.
India Vix Trading: Things that Volatility Index Indicates
Whether you are new to the stock market or have been around for a while, you may have come across several trading tools and indicators. And if you have been trading futures and options, then VIX or the Volatility Index is one such term that most traders and investors are familiar with.
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