Subscribe for real-time financial insights on Trade Target’s WhatsApp Channels
Intraday and delivery trading are two common ways to trade in the stock market. The main difference lies in how long you hold the stocks. Intraday trading involves buying and selling on the same day for quick gains while delivery trading focuses on holding stocks for the long term to earn steady returns. Your choice depends on whether you prefer fast profits or long term growth.
In this article, we’ll explore the difference between intraday and delivery trading, along with their pros and cons.
What is Intraday Trading?
Intraday trading or day trading involves buying and selling stocks within the same day. Intraday traders do not hold any positions overnight. All trades are squared off before the market closes.
Primary goal of intraday trading is to earn profits from small price movements during the day. If the market moves in the opposite direction, they may exit early to limit losses.
Since positions are closed on the same day, intraday trading requires quick decision making and continuous tracking of price trends, volume, news and technical indicators.
Now you might be wondering, is intraday trading risky? Intraday trading carries a high level of risk. It is a fast paced approach that demands discipline, real time analysis and proper risk management. Without a clear strategy and stoploss, traders can face significant losses.
- Stock Selection
Intraday traders choose highly liquid stocks because it ensures traders can quickly enter or exit a position without much price fluctuation. This is important in intraday trading where every second and price movement matters.
- Technical Analysis Over Fundamentals
Intraday traders usually pay close attention to the first and last hour of the trading session. These times tend to have higher volatility, offering more trading opportunities. Traders look at early market trends, news and pre market data to plan their trades.
- Quick Execution
All intraday trades must be squared off before the market closes on the same day. That means any shares bought need to be sold on the same day, with no exceptions. The goal is to capture small price movements within a single trading session.
- Risk Management
Intraday trading requires proper risk management, including setting stop loss and target prices and using a risk to reward ratio to favor gains over losses.
- Timing the Market
Intraday traders often avoid the first 15–30 minutes of market opening due to volatility. They prefer trading during stable periods, late morning to early afternoon when price patterns are clearer.
Advantages of Intraday Trading
Here are some pros and cons of intraday trading.
- Leverage with Margin: Intraday traders can use margin facilities provided by brokers. This allows you to trade larger positions than your actual capital by borrowing funds for the day. If the trade works in your favor, the gains can be significant. However, losses can also multiply. Margin works both ways, higher reward but also higher risk.
- Opportunity for Daily Profits: Stock prices often fluctuate during the day due to market news, trends or technical factors. Intraday traders can profit from these price movements without holding the stock overnight.
- No Overnight Risk: Since all positions are squared off before the market closes, there’s no exposure to overnight risks such as global market movements, company announcements or geopolitical events.
Disadvantages of Intraday Trading
Despite its benefits, intraday trading comes with notable risks that traders must be aware of. Here are some disadvantages of intraday trading.
- High Volatility and Risk: Intraday trading relies on short-term price movements, which can be extremely volatile. One sudden market move can trigger losses if you're not quick to react or haven’t set proper stop losses. Without discipline, losses can quickly add up.
- Constant Monitoring Required: Intraday trading demands your full attention. You need to closely track the market and make fast decisions. This can be mentally exhausting, especially when trades move against you.
- Brokerage and Tax Impact: Frequent buying and selling can lead to high brokerage fees and STT (Securities Transaction Tax) which can eat into your profits. Also, short term gains are taxed higher than long term ones.
What is Delivery Trading?
Delivery trading means buying stocks and holding them in your Demat account for the long term. Unlike intraday trading, where you buy and sell on the same day, delivery trading allows you to keep the stocks for days, months or even years. You fully own the shares until you decide to sell them.
Advantages of Delivery Trading
- Long Term Investment Potential: Delivery trading allows you to hold stocks for the long term, weeks, months or even years. If the company performs well, its stock price can rise, resulting in capital gains. This approach suits investors who believe in a company’s future growth.
- Full Ownership of Shares: Once you purchase shares in delivery, they are credited to your demat account. You have complete ownership and can hold or sell them whenever you choose, without any time restrictions.
- Dividend Income: Many companies distribute a portion of their profits to shareholders as dividends. Even if the stock price doesn’t move much in the short term, holding high quality stocks can provide a steady income through dividends.
- Lower Transaction Frequency and Less Stress: Unlike intraday trading, delivery trading doesn’t require constant monitoring. You’re not pressured to make quick decisions or track minute by minute price movements.
- No Compulsory Daily Square Off: There’s no obligation to sell shares on the same day. You can keep them for as long as you want, giving you flexibility in your trading strategy.
Disadvantages of Delivery Trading
- Higher Capital Requirement: Delivery trading requires you to pay the full value of the stock upfront. Unlike intraday trading, where margin is provided, here you need more capital to buy shares.
- Opportunity Cost: When your money is tied up in delivery trades, you might miss out on other investment opportunities that could potentially offer better or faster returns.
- Exposure to Market Risks: Holding stocks over the long term does not make them risk free. Market volatility, economic slowdowns, geopolitical issues or negative company news can lead to price declines.
- Requires Active Portfolio Management: To get the most out of delivery trading, you need to track market trends, company performance, financial news and global economic indicators regularly. Without proper research and portfolio management, long term investments may not perform as expected.
- Brokerage and Holding Charges: Though often overlooked, delivery trading involves brokerage charges, demat account maintenance fees and other hidden costs that can eat into your returns over time.
Intraday Trades vs Delivery Trades
| Criteria | Intraday Trading | Delivery Trading |
|---|---|---|
|
Time Horizon |
Buy and sell on the same day. No positions are carried forward overnight. |
Shares are held for a longer duration days, weeks, months or years. |
|
Trading Objective |
Profit from small price movements within a day through multiple trades. |
Invest in fundamentally strong stocks for long term gains and dividend income. |
|
Risk and Reward |
High risk due to short term market volatility. Gains can be quick, but so can losses. |
Lower risk over time. Gains are slower but often more stable and include long term capital appreciation. |
|
Analysis Used |
Relies heavily on technical analysis - charts, indicators and patterns. |
Primarily based on fundamental analysis, company performance, financials, industry outlook, etc. |
|
Capital Requirement |
Lower capital is needed due to margin benefits provided by brokers. |
Requires full payment of stock value as margins are not allowed for delivery. |
|
Emotional Involvement |
High stress, quick decisions and constant monitoring are needed. |
Less emotional pressure, decisions can be planned and reviewed over time. |
|
Brokerage Charges |
Usually lower per trade but frequent trading can add up in costs. |
Brokerage may be higher per trade, but fewer transactions help keep total costs down. |
|
Ownership of Shares |
No ownership, stocks are not credited to your demat account. |
Full ownership of shares until you decide to sell. |
Intraday vs Delivery Trading: How Should Your Approach Differ?
So, when it comes to intraday vs delivery trading, the best choice really depends on your interests, risk appetite and market knowledge.
Intraday Trading Strategy
Intraday trading involves buying and selling stocks within the same trading day. The goal is to profit from small price movements. Since it’s fast paced and high risk, your strategy must be sharp and disciplined.
1. Use Stop-Loss Orders:
- Always set a stop loss to cap your potential losses. This helps protect your capital if the trade moves against your expectation.
2. Rely on Technical Indicators
- Use tools like:
- Moving Averages: For trend direction
- RSI: To spot overbought or oversold conditions
- MACD: To identify momentum shifts
3. Stay Alert and Monitor Market News
- Intraday prices can move rapidly. Keep track of:
- Live market data
- Economic reports
- Global and domestic news
4. Act Fast, But Smart
- Speed matters but avoid impulsive trades. Develop the ability to analyse charts and act quickly without losing discipline.
5. Control Emotions
- Don’t let fear or greed drive your actions. Stick to your trading plan and exit trades based on strategy, not emotion.
Delivery Trading Strategy
Delivery trading involves holding stocks for a longer period, weeks, months or even years. It’s suitable for building long term wealth with lower daily risk.
1. Focus on Fundamentals
- Before buying, evaluate:
- Company’s financial health
- Management quality
- Revenue and profit growth
- Industry potential
Invest in businesses with solid fundamentals and future growth prospects.
2. Diversify Across Sectors
- Don’t invest all your money in one stock or sector. Spread your investment across different industries. This reduces the risk of your entire portfolio being affected by a downturn in a single area.
3. Think Long Term
- Delivery trades are not for short term gains. Focus on consistent, compounding returns over time rather than reacting to every market movement.
4. Do Thorough Research
- Take your time to study a company before investing. Read annual reports, understand business models and check historical performance. Match your choices with your long term financial goals.
5. Be Patient and Stick to Your Plan
- Markets fluctuate. Avoid panic selling when prices dip. Stay invested and give your holdings time to perform
Final Words
Intraday trading is all about capturing short term price movements within the same day. While it can offer quick profits, it also comes with high risk if not managed properly. In contrast, delivery trading suits those looking for long term growth. You invest in fundamentally strong companies and hold them to benefit from price appreciation and dividends over time. The key to making profits in either style lies in having the right strategy, proper timing and a solid understanding of market trends.
Frequently Asked Questions
What is better, intraday or delivery trading?
It depends on your goals. Intraday trading offers quick profits but comes with higher risk. Delivery trading is safer and better for long term, stable returns.
Which indicator is suitable for intraday trading?
Commonly used indicators are Moving Averages, Bollinger Bands and RSI. These help identify trends and give clear entry and exit signals.
Are intraday charges less than delivery trading?
Yes, intraday charges are usually lower since there's no delivery to a demat account. But frequent trading can still increase overall costs.
When to choose intraday over delivery trading?
Choose intraday if you’re skilled in technical analysis, can monitor markets live and aim for quick gains. Go for delivery if you prefer a long term, hands off approach.
Happy investing and thank you for reading!
Disclaimer:
This website content is only for educational purposes, not investment advice. Before making any investment, it’s important to do your own research and be fully informed. Investing in the stock market includes risks, and you should carefully read the Risk Disclosure documents before proceeding. Please remember that past performance doesn’t guarantee future results, and due to market fluctuations, your investment goals may not always be achieved.
