The Difference Between Intraday and Delivery Trading

The Difference Between Intraday and Delivery Trading

Intraday trading involves buying and selling stocks within the same trading day, while delivery trading allows you to hold onto your stocks for a longer period. The choice between the two depends on how long you plan to own the shares. For more information on the intraday vs delivery trading debate, you can refer to the following article.

Intraday vs Delivery

Intraday traders focus on technical analysis and short-term trends, while delivery traders use fundamental analysis and longer-term patterns. There are different strategies for trading on the stock market, including short-term transactions and long-term investments. Intraday trading involves making quick buys and sells, while delivery trading involves holding onto investments for a longer period. Understanding the difference between intraday and delivery trading is crucial for successful stock market trading. 

Most investors who are eager to trade must learn the process. And with the help of a stock trading platform, it's easy for traders to trade in the stock market without much hassle. Intraday trading is the idea of purchasing and selling stocks on the same day.

Your transaction becomes a delivery trade if the position hasn't squared off that day and you anticipate holding the shares for a much longer period. Trading tactics change between delivery trading vs intraday.  

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Table of Content

  1. Intraday vs Delivery
  2. What is Intraday Trading?
  3. Advantages of Intraday Trading & Disadvantages of Intraday Trading
  4. What is Delivery Trading
  5. What is the importance of Trading Margins?
  6. What Distinguishes Intraday from Delivery Trading the most?
  7. Basic Differences between Intraday and Delivery Trading

What is Intraday Trading?

Transactions that begin and end on the same trading day are referred to as intraday trading. For instance, you would have earned an intraday trading profit of Rs. 2000 (Rs. 22,000 - Rs. 20,000) if you had purchased 100 shares of a company at Rs. 200 a share and the stock price had increased to Rs. 220 per share. If the stock price dropped, you would have lost Rs. 2,000 (Rs. 18,000 - Rs. 20,000). 

Advantages of Intraday Trading & Disadvantages of Intraday Trading

 

Advantages

Disadvantages

Intraday trading allows investors to use their capital to make small investments in stocks, potentially leading to higher profits with a smaller investment.No matter the tools utilised, market timing is consistently uncertain. You can forfeit your position the day following a stock movement in the opposite direction of your prediction, resulting in unavoidable losses.
Intraday traders can make a profit from falling stock prices by selling shares they do not possess. They can sell stock early in the trading day without purchasing it beforehand, then buy it back at a lower price to make a profit.Intraday trading involves not holding onto stocks during important dates such as dividend record days, bonuses, rights issues, or stock splits, resulting in the omission of these extra advantages.
By engaging in intraday trading, traders can detect developing market trends in their initial stages.Continuous monitoring is essential for intraday trading. Traders need to closely observe the market's minute-by-minute changes, leaving little room for downtime. This task can be mentally taxing and require significant time investment.

What is Delivery Trading

Buying assets and keeping them for a longer amount of time—typically more than one trading day—is known as delivery trading, also referred to as positional trading. After receiving the shares, the investor retains them in their Demat account. For instance, you would sell all 100 shares of ABC Company for Rs. 350 each, or Rs. 35,000, if you invested Rs. 300 in 100 shares, which appreciated to Rs. 350 each. If the stock price dropped, you would have lost Rs. 5,000 (Rs. 25,000–Rs. 30,000), whereas your delivery trading profit would have been Rs. 5,000 (Rs. 35,000 - Rs. 30,000).

What is the importance of Trading Margins?

Understanding the significance of trading margins is essential for traders as it provides them with increased autonomy over their funds. With trading margins, traders have the potential to amplify their earnings through larger trades. Nonetheless, this approach also comes with increased risk, as losses have the potential to be more substantial. Consequently, traders need to comprehend the mechanics of margins and effectively oversee them to mitigate the possibility of significant financial setbacks.

What Distinguishes Intraday from Delivery Trading the most?

The duration of the holding of the securities is the primary distinction between intraday trading as well as delivery trading. While delivery trading entails purchasing and keeping shares for an extended amount of time, intraday trading includes purchasing and selling securities during the same trading day. As you know the key point for the difference between intraday and delivery trading, it's easy to make your investment in either one of them. Let's check some basic differences between intraday and delivery.

Basic Differences between Intraday and Delivery Trading

Here are some of the basic differences in delivery trading vs intraday trading in the stock market. 

Aspect

Intraday Trading

Delivery Trading

Timeframe

Same trading day

More than one trading day

Settlement of Transactions

Executed on the same day

Settled later

Risk and Return

High risk

Less risky

Brokerage Fees

Typically cheaper due to higher volume

May be higher due to fewer transactions

Margin

Can opt for margin to increase capital

Doesn't involve the use of a margin

Trading Approach

Technical evaluation and short-term trends

Fundamental research and long-term trends

Tax Implications

Speculation profit with higher tax rates

Capital gain, potentially lower tax rates

Conclusion
The article explains the distinction between intraday trading vs delivery trading in the Indian stock market in simple terms. While delivery trading entails purchasing and keeping shares for an extended period, intraday trade includes purchasing and selling securities during the same trading day. 
The article “Intraday vs Delivery Trading”  also discusses the differences between the two methods of trading in terms of timescale, transaction resolution, risk and return, brokerage fees, margin requirements, trading technique, and tax ramifications. Overall, this in-depth detail is useful as a primer for those who want to learn the fundamentals of stock trading in India. One can download the stock trading app to understand everything related to trading. 

Frequently Asked Questions about Intraday vs Delivery Trading

While delivery traders leverage fundamental analysis & long-term trends to invest in firms with significant growth potential, intraday traders utilise a technical assessment and short-term trends to earn quick returns.

While intraday traders attract short-term capital gain, the taxes are around 15% on your trade. For the delivery trade, short-term as well as long-term capital gain taxes are applicable.

Because intraday trading offers the possibility of rapid gains, it can result in higher profits. Nevertheless, the risks associated with it are higher than those of delivery trading, which is comparatively safer but may yield lower profits.

Yes, using margin to increase potential gains or losses is permitted in intraday trading. Delivery trading, on the other hand, does not require the use of margin.

Brokerage fees are usually lower in intraday trading because of the higher volume of transactions. Because there are fewer transactions in delivery trading, brokerage fees may be slightly higher.

Indeed, compared to intraday trading, delivery trading is safer. Prolonged holding of securities lowers exposure to the high volatility of intraday trading while opening up opportunities for long-term gains.