uTrade Algos
In the field of trading, there are two primary ways to trade, namely delivery trading and intraday trading. For beginners in this field, these terms may seem confusing. To assist novice traders, this blog will provide an overview of delivery trading and intraday trading and highlight the key differences between them, helping traders determine which trading method suits them best.
Table of Contents
Delivery Trading
- Delivery trading refers to the buying and selling of stocks and their reflection in the Demat account.
- In delivery transactions, the trader is not required to sell off their trades before the day ends and can choose to stay invested for more extended time periods.
- The primary feature of delivery trade is that stocks bought are reflected in the Demat account before they are sold off in the stock market. As long as the trader receives their stocks in the Demat account, it is considered to be a delivery trade.
Share India offers its users delivery trading services, thereby allowing traders to enjoy a seamless and secure trading experience. Moreover, Share India provides a highly secure Demat account that effectively manages your investments, ensuring utmost safety and protection with its encryption and essential security features.
Benefits of Delivery Trade
No Time Limit for Delivery Trade
Delivery traders are not bound by any mandatory time limit to sell their stocks. Unlike intraday traders, delivery traders have the freedom to hold onto the stocks they purchased for as long as they want. They are not obliged to square off their positions before the end of the day.
Opportunity to Receive Dividends
If the delivery traders stay invested in stocks for an extended time, they may get opportunities to receive dividends for the companies. Delivery trading makes it possible for traders to hold ownership of shares for longer time periods so that they can receive dividends and bonuses.
Lesser Risk Involved
Delivery trading involves less risk compared to intraday trading. One reason for this is that delivery traders can do short selling, which is a high-risk strategy for intraday traders. Delivery traders also have more time to research and analyse the market and its sentiments before closing their trades. However, it’s important to note that trading always involves some level of risk, regardless of the strategy used. Hence, proper risk management techniques should be used to manage risk effectively.
Disadvantages of Delivery Trading
Overnight Risk
Delivery traders face risks of sudden overnight market changes that can lead to unfavourable outcomes. Hence, delivery traders need to set up proper risk management tools to avoid overnight risks that may lead to potential losses.
Full Payment for Shares
Delivery traders are required to make full payments to acquire shares. They are not allowed to make margin trades or short-sell their shares in the market. Hence, delivery trading requires more capital than intraday trading.
Intraday Trading
- Intraday means anything that occurs within a day.
- Intraday trading involves buying and selling stocks within the trading hours of the day. Such traders are required to sell off their positions and start anew from the next day.
- Intraday trading is considered to be a short-term trading method that involves high risk.
- Intraday trading harnesses the small price movements in the stock indices to capitalise on the fleeting market changes.
- There is no transfer of stocks or shares to the Demat account in intraday trading.
Trade whenever and wherever you want with Share India’s professional trading platform, offering intraday trading services on multiple devices.
Benefits of Intraday Trade
Option to Short-sell
Intraday traders have the choice to short-sell shares. Short selling refers to borrowing shares to sell them off in the stock market. Intraday traders short-sell shares when they expect a fall in their prices, which allows them to buy back shares at a lower price. However, short-selling is a high-risk strategy that should be used cautiously.
Predict Market Trends
Intraday traders primarily trade according to small price movements in the stock market. Because they are exposed to minor market changes, they can study these changes to predict upcoming stock market trends. This benefits intraday traders by allowing them to catch the market wave early before delivery traders.
No Overnight Risks
Intraday trading protects traders from overnight market risk. Sudden and unexpected changes in the stock market during the night after the trading hours do not affect intraday traders as they close off all their positions before the trading hours.
Disadvantages of Intraday Trading
Missing Out on Overnight Market Opportunities
Intraday traders cannot trade outside trading hours, thereby missing out on market opportunities. This is the primary disadvantage of intraday trading, restricting traders’ ability to grasp market opportunities overnight.
High Exposure to Market Risk
Intraday traders are exposed to heightened risk during times of high market volatility. Due to the stock market’s unpredictable nature, this approach to trading requires constant monitoring of the market to avoid risks.
Suitability of Each Trading Method
It’s important to note that neither delivery trading nor intraday trading is a one-size-fits-all approach suitable for all traders. Every trader has unique trading goals, market approaches, and personal preferences that determine which approach is more appropriate for them.
However, delivery trading is a suitable option for those who don’t have the time to review their portfolios on a daily basis and prefer to invest for the long term.
On the other hand, intraday trading can be a suitable option for traders with strong technical knowledge to analyse charts and patterns on a daily basis to catch small fleeting market fluctuations.
Both of these approaches require solid foundational knowledge and technical skills to avoid losses.
Conclusion
Delivery trading and intraday trading are two popular trading methods that offer their unique benefits and risks. It is crucial for traders to understand the differences between these approaches and determine which one is suitable for their trading goals, market approaches, and personal preferences. Acquiring foundational knowledge is essential for both intraday and delivery trading to avoid losses while making the most of investments. With Share India’s professional trading platform and highly secure Demat account, you can enjoy a seamless and secure trading experience, regardless of which approach you choose.