Intraday Trading and Delivery Trading are two different types of trades used in the stock market. Intraday trading and delivery trading both have different modus operandi. It is generally seen that people who wants to earn money in the short time prefers Intraday trading and long term investor prefers delivery trading.
In this post, we will take a look at details about Intraday trading and delivery trading. In addition to that I will also share advantages and disadvantages of both trading strategies. It will help you to decide which trading strategy to use while dealing with stock market.
Intraday Trading or Delivery Trading – Which one to select?
What is Intraday Trading?
Buying and selling stocks in the stock market is called trading. If trading activity of buy and sell is done on the same day, it is known as Intraday Trading. In Intraday trading stock is purchased with the aim or earning profit in the short time. Intraday trading is done by expert traders who is aware of technical analysis.
The activity of buy and sell in this case is done on the same day during market hours. In case individual forgets to sell position, the trades are executed automatically during the closing hours.
To participate in Intraday trading, you require online trading account. There are multiple companies offering online trading accounts. Here is list of Best Demat Trading accounts in India.
Advantages of Intraday Trading
Allowed to buy share on margin money
You need to pay only margin money to execute the trade. This means investment requires for intraday trading is very low. You can gain more by investing less.
Short selling is allowed in the Intraday. This means if you feel that price of share is likely to fall, you can square off your position by doing short selling.
Brokerage charges associated with trading account is very low. There are multiple discount brokers offering trading account at very low cost
Disadvantages of Intraday Trading
You require detail monitoring when you opt for intraday trading. If you don’t track market minute to minute you may end up losing your money.
The time frame requires for executing trade is very low in intraday trading. As time period is low it is very difficult to predict movement of stock. You need to cut off your position on the same day. Sometime it may lead to losses.
You will not get any benefits of dividend, bonus etc. which are additional benefits announced by the company for the shareholders.
What is Delivery Trading?
Delivery Trading is one of the most common trading method used by investors in the stock market. In delivery trading stock is purchased with the aim of capital appreciation over long run. In this trading, before buying a stock investors generally carryout fundamental analysis. This is to ensure that stock gives good returns over the longer duration.
The delivery trading is done without any time constraints. This means you can hold stock for indefinite period of time. You require demat account in order to carryout delivery trading.
Advantages of Delivery Trading
No Time Limit
You need not to worry about time limit in delivery trading. You can hold stock for the month, year or couple of years. You are likely to earn more profit over the long run the stock.
Benefits of Bonus, Dividend
In Delivery Trading you will get benefits of dividend, bonus, right issue, share split etc. This gives you additional benefits. It is not available in the intraday trading.
The risk involved in delivery trading is very low. You can hold stock for the longer duration and sell when you are earning higher profit.
Disadvantages of Delivery Trading
You need to make full payment for executing trade. Your trade will not be executed if you are unable to provide full payment for the trade.
High Brokerage Charges of Demat Account
You need to open demat account and pay maintenance charges for the demat account. You also need to pay high brokerage fees for delivery based trading.
Sometimes it takes time to get return out of stock. This means wait period in delivery trading is higher compared to intraday trading.
Intraday or Delivery Trading – Which one to select?
Well, intraday and delivery trading both trading techniques are different. A person who wants to make lot of money in shorter span go for intraday trading. Intraday trading requires monitoring of stock market minute by minute. It also requires extensive knowledge about technical analysis, charts and algorithms.
A beginner who is not comfortable with such approach should stay away from intraday trading. Intraday can help you to make quick money but chance of losing money is also very high. If you got expertise to quickly square off positions based on market condition for making money you can opt for Intraday trading.
If you have patience and if you can invest money for the longer duration you should go for delivery trading. Delivery trading usually requires knowledge of fundamental analysis.