In today’s world, many people are looking for ways to make money through stock trading.
Whether you are new to the stock market or considering different trading options, understanding the differences between intraday trading and delivery trading is key to choosing the right approach.
These two trading styles have distinct strategies, timeframes, and risk factors, and it’s important to know how they work before diving in.
Let’s break it down in simple terms so you can make informed decisions about how to invest your money.
What is Intraday Trading?
Intraday trading is a style of trading where you buy and sell stocks within the same day. The goal of intraday traders is to profit from short-term price movements in the market.
This approach doesn’t require holding onto stocks overnight, everything is bought and sold on the same day.
How Intraday Trading Works
- A trader buys a stock at one price and sells it at a higher price during the same trading day.
- For example, if you buy 100 shares of a company at ₹2500 in the morning and sell them at ₹2520 by afternoon, you make a profit of ₹2000 for that day.
Intraday traders often use technical analysis to make quick decisions, which means they focus on short-term charts and patterns that tell them when to buy or sell.
Some traders even use tools like price indicators and moving averages to time their trades.
Pros and Cons of Intraday Trading
Advantages:
- Leverage: You can borrow money from a broker to increase the size of your trade, which means you can buy more stocks than you could with just your own funds.
- Quick Returns: The potential to make quick profits from small changes in stock prices.
- Flexibility: You can make money whether the market is going up or down (through strategies like short selling).
Disadvantages:
- Time Pressure: You need to buy and sell stocks quickly, which can be stressful and sometimes result in forced sales at a loss.
- High Risk: The use of leverage can amplify both profits and losses, meaning you could lose more than your initial investment.
- Market Volatility: Stock prices can change very quickly, leading to sudden and unexpected losses.
What is Delivery Trading?
On the other hand, delivery trading is a style where you buy stocks with the intention of holding them for a longer time, anywhere from a few days to several years.
In this case, you are not trying to profit from daily price fluctuations, but rather focusing on the stock’s long-term growth potential.
How Delivery Trading Works
- A delivery trader buys shares and holds onto them for an extended period.
- For example, you might buy 20,000 shares of a company at ₹100 per share, then hold them for several months. If the price rises to ₹200, you sell them for a profit.
This approach is generally more relaxed compared to intraday trading.
Delivery traders rely more on the fundamental analysis of a company, looking at things like company growth, earnings, and overall market conditions, rather than short-term price movements.
Pros and Cons of Delivery Trading
Advantages:
- No Time Pressure: You can hold onto stocks as long as you want without the need to worry about daily price changes.
- Ownership Benefits: By owning stocks, you may receive dividends and have the right to vote in shareholder meetings.
- Lower Impact from Market Swings: Since you’re in for the long haul, short-term market volatility is less likely to affect your investment.
Disadvantages:
- Capital Requirement: You need to pay the full price of the stock upfront, which can require more capital than intraday trading.
- Locked Capital: Your money is tied up in the investment for a longer period, which means you won’t be able to use it for other purposes.
- No Short-Term Profit: You can’t profit from short-term price drops, unlike intraday traders who can use short selling to benefit from falling stock prices.
Intraday Trading vs. Delivery Trading: A Quick Comparison
Let’s take a look at the main differences between intraday trading and delivery trading in a simple comparison chart.
| Aspect | Intraday Trading | Delivery Trading |
| Timeframe | Buy and sell within the same day. | Hold stocks for a longer time (days, months, or years). |
| Trading Style | Focuses on short-term price movements. | Focuses on long-term growth of stocks. |
| Stock Type | Prefers highly liquid stocks with large trading volumes. | Can invest in both liquid and illiquid stocks with strong long-term potential. |
| Leverage | Brokers often provide margin (leverage). | Generally, no leverage used; requires cash payment for shares. |
| Risk | High risk due to market volatility and leverage. | Lower risk as it’s less affected by short-term market swings. |
| Market Type | Active in both rising and falling markets. | Focuses on buying undervalued stocks for long-term growth. |
The Role of Margin in Trading
One of the key differences between intraday trading and delivery trading is the use of margins or leverage.
- In intraday trading, you can borrow money from your broker (known as margin trading) to buy more shares than you could otherwise afford. For example, if you have ₹20,000 in your account and use a 5x margin, you could control ₹100,000 worth of shares. While this can increase profits, it also increases the potential for big losses.
- In delivery trading, margin is usually not a common practice. You need to have the full cash amount for the shares you are purchasing, though some brokers may offer margin for large purchases.
How to Choose the Right Approach for You
When deciding between intraday trading and delivery trading, here are some factors to consider:
Trading Volumes:
- Intraday traders typically prefer stocks with high trading volumes, so they can buy and sell quickly without worrying about liquidity.
- Delivery traders can invest in stocks with lower volumes if they believe the stock has long-term potential.
Investment Analysis:
- Intraday traders usually rely on technical analysis (using charts and price patterns) to make quick decisions.
- Delivery traders rely more on fundamental analysis, which involves evaluating the long-term financial health and growth potential of a company.
Risk Tolerance:
- Intraday trading is better suited for those who are comfortable with higher risks and fast-paced decision-making.
- Delivery trading may be a better option for those who prefer a more stable approach and can hold onto stocks for longer periods.
Bottom Line
To sum up, the main differences between intraday trading and delivery trading come down to how long you hold your investments, the type of analysis you use, and the level of risk you’re willing to take. Intraday trading is about making quick profits from short-term price movements, while delivery trading is about holding stocks for the long term to benefit from a company’s growth.
If you are someone who wants quick returns and is comfortable with high risk, intraday trading might be the way to go. But if you prefer a more relaxed approach and are in it for long-term growth, delivery trading could be a better fit.
Whichever approach you choose, it’s important to understand your own financial goals, risk tolerance, and how much time you can dedicate to researching and analyzing the market.
Frequently Asked Questions (FAQs)
Which is better, intraday or delivery?
It depends on your investment goals and risk tolerance. Intraday trading can offer quick profits, but it’s riskier. Delivery trading is typically seen as more stable over the long term.
Can I buy in delivery and sell intraday?
Yes, you can sell delivery shares on the same day. However, it will be considered an intraday trade, and the transaction will be treated differently by your broker.
Can we sell delivery shares on the same day?
Yes, you can sell delivery shares on the same day. If you do, it will be considered an intraday trade.
Can I convert delivery to intraday?
Yes, if you bought shares on the same day, you can convert them to intraday positions before the market closes.
By understanding the basics of intraday trading and delivery trading, you’ll be better equipped to make the right decision based on your financial situation and goals.
