Intraday vs Delivery

More on Intraday Trading

If you are a beginner trader, then you need to understand a lot of stock market basics. As long as 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.

Intraday vs Delivery Basics

When the securities are bought and sold on the same day and the orders are squared off before the end of the trading day, it is called Intraday Trading; whereas when the securities are bought and held overnight and taken delivery of, it is called Delivery Trading.

These are the two modus operandi to operate in the market.

The purpose or intent behind both forms of trading and the risks involved and the capital required vary in intraday vs delivery trading.

During 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.

The choice of intraday vs delivery trading is in the hands of the trader, depending upon his intent of trading, risk appetite, capital available and multiple other factors.

Practically, intraday trading and delivery trading differ on the following parameters:

Intraday Vs Delivery Purpose

The purpose or intent behind day trading is generally quick profits. The trades are squared off at the end of the trading day, so the day traders take advantage of the movement in the price of the securities in the market within a day and earn profits.

However, the traders who get involved in delivery trading have the intent of investment as the securities are held for longer periods of time.

If the trader can make judgements about the movement of the market at small intervals and can also use intraday technical tools while employing different intraday trading strategies to help in making these judgements, day trading is a good alternative, however, if the trader wants to make fundamental assessments of the securities and then make long-term investments, delivery trading is a better-suited option.

Intraday Vs Delivery Capital Requirements

Capital required for intraday trading is usually less as the payments can be made in small margins. This small amount of capital can be leveraged to earn huge profits and more can be attained by investing less.

Even if you have less money, a high margin is available for you to do transactions worth multiple times of the capital in hand. On the other hand, for delivery trading, complete upfront payments are to be made.

The securities are fully paid for and this may end up in binding the money and not having capital when the opportunities arise in the future.

Intraday Vs Delivery Risks

In intraday trading, the securities are squared off before the end of the trading day, so the risks are limited to within the day, but in delivery trading, the positions are held overnight and in fact, over months and years, so the risk continues.

However, intraday trading holds to be riskier in the aspect that profits or losses in intraday trading are made only on the basis of that particular day’s performance of the security and the trader has to watch each and every move very carefully and with utmost attention.

Whereas in delivery trading, even if the security does not do very well, the investor has the potential to get bonus, dividend payouts, rights issue etc.

Intraday Vs Delivery Brokerage

The brokerage charged for intraday trading is always less than the brokerage charged for delivery trading. Some brokers charge brokerage on the basis of volume traded and others charge a flat rate of brokerage irrespective of the volume.

The brokerage again varies depending on the type of the stockbroker you have chosen. Where bank-based stockbrokers or full-service stockbrokers charge relatively high brokerage, there are discount brokers that charge a flat rate irrespective of the trade type you move ahead with.

You can check the brokerage calculator to understand the difference between rates clearly. This is one of the biggest differentiators when it comes to intraday vs delivery based trades.

Intraday Vs Delivery Demat Account Requirements

Since the securities are not kept overnight and all the positions are closed before the end of the trading day in intraday trading, a Demat account is not required.

However, in delivery trading, the securities are delivered to the traders, so a Demat account is a necessity as it is the account where all the securities will be stored for the future.

Thus, as discussed, intraday trading and delivery trading are two different strategies to be dealing with the financial markets. Each of these has it owns advantages and disadvantages, that the trader needs to consider before making a decision on which path is to be taken.

Intraday Trading Advantages

Apart from highlighting some of the key differences between intraday vs delivery styles of stock market trades, let’s also talk about some of the positives and negatives of both the styles.

Starting with the benefits of intraday trading:

  • Capital required is very less and a high margin is available; securities can be bought without paying the full amount.
  • There are no overnight risks.
  • Investment gets realised on the same day.
  • Money is returned at the end of the trading day, and it can be used further the very next day.
  • Brokerage for intraday trading is always less than delivery trading.
  • Short selling of shares is possible, i.e. the shares can be sold even before buying, which helps to generate profits even when the price of securities is sure to fall.

Intraday Trading Disadvantages

At the same time, there are few concerns as well that you must be aware of:

  • There are no long-term gains.
  • Due to the high risks, there can be huge losses too. Thus, technical research is mandatory before you place your trades.
  • Day Trading requires a constant attention of the trader for every minute of the day.
  • Loss on the price of securities means clear loss of money; it cannot be compensated as all the trades close at the end of the day.
  • Daily profits and losses take a toll on the psychological well-being of the day trader.

Delivery Trading Advantages

Moving ahead, let’s see some of the positives if you go ahead and try your hand at delivery trades:

  • There are long-term gains in terms of security price, along with bonuses, dividends, rights issue etc. This leads to higher returns.
  • There is no time limit to sell the securities.
  • The securities can be held as long as they reach the desired price.
  • All types of shares are traded under this segment.
  • By choosing the right Delivery Trading Strategy the maximum profit can be earned.

Delivery Trading Disadvantages

And of course, there are going to be some concerns as well that you must know about delivery trading:

  • Higher brokerage needs to be paid.
  • The long-term investment is subject to market risks, business cycles etc.
  • Complete upfront payment is to be made.

Therefore, both intraday trading and delivery trading are efficient ways to deal with the market. It is the requirement and purpose of the trader that makes him decide which route he wants to take. Both have their benefits and drawbacks, which can be well-managed and balanced by an efficient trader.

Ideally, the ones looking for quick paybacks and with technical knowledge should go for day trading, and the ones with the intent of long-term investment and fundamental knowledge should go for delivery trading.

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