When you buy and sell shares within a single day, it is known as intraday trading.
When you make only one side of the transaction, that is, either buy or sell during the day, it is known as a delivery trade. This means that if you do not buy and sell on the same day it becomes a delivery trade.
As a trader with a well-known broker such as Kotak Securities, you may want to know the difference between intraday trading and delivery trading. Here we look into the differences between the two to help you trade effortlessly.
Understanding intraday trading
The buying and selling of stocks in a trading session — in the given working hours of a single day — is referred to as intraday trading. However, by the end of the day, if you have not settled your position, you may find your stock getting sold automatically at the day’s closing price, depending on the specific brokerage plan. Hence, it is critical to check with your broker on automatic squaring off of trades.
As a rule, traders generally initiate intraday trading by setting a specific price target for the stock. They buy the stock if it trades below the target, and sell it when it achieves the objective. At the same time, if the intraday trader is of the opinion that the stock will not reach the targeted price by the end of the closing hours, he decides on the best price for the stock to be sold. In intraday trading, you do not have ownership on stocks that you purchase. When you buy stocks, you have to sell them within the working hours of the day trade. Here, the price movement of the stocks is of paramount importance.
Understanding delivery trade
When you buy stocks, in delivery trades, they are added to your Demat account. These stocks stay in your Demat account till the time you decide to sell them. You can maintain the shares for an indefinite period. However, you need to clarify with your broker on delivery trades and ensure that your stocks are delivered to your Demat account in a delivery order, unlike intraday trading. In delivery trading, you own the shares that you purchased during the day for a time limit of your choice. This means you can hold onto the shares for as long as you desire, depending on long-term price movement.
The best option: intraday trading on delivery trading?
Based on your planning and trading executions, you need to decide which of the two can be more profitable for you. Intraday trading involves technicalities, chart patterns, news flows, and other statistical data. On the other hand, delivery trading is based on fundamentals such as the outlook of the company, macroeconomic factors, industry attractiveness, overall profitability, company prospects and the like.
While intraday trading attracts lower brokerage, as it is more concerned on churning capital, delivery trading has a higher brokerage attached to it, as it scans opportunities for growth and long-term value of stocks. Knowing about these factors can help you understand and choose the more profitable of the two options.