What are the Benefits of Intraday Trading?

Intraday trading is usually seen as a high-risk activity, not just by novice traders, but also by expert traders. But, just as every coin has two sides, don't we also consider the benefits of intraday trading?

Have you ever dreaded an exam only to ace it completely? If you answered yes, you know there is a distinct thrill in closing the most complex deals and doing something that previously seemed impossible.

If you have been focusing on the disadvantages of intraday trading for a long time, it is time to turn your attention to the benefits of intraday trading.

What is Intraday Trading?

Intraday trading is a daily trading process that involves buying and selling stocks through online platforms. To participate, one must clearly understand the trend and take a position based on it. A trend view involves predicting the future direction of stock prices within a given period. If prices are expected to rise, one should take a long position, buying, and if they are expected to fall, a short position, selling. To settle a position, one must square off by the end of market hours or have their broker automatically do so.

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Benefits of Intraday Trading

The following is the list of benefits of intraday trading:

• Minimizes risk

Intraday trading minimizes the risk of substantial losses as securities are bought on the same day. Whereas, in the case of standard trading, the principal is locked in for a long time, so price changes can be significant, which makes an investor lose money. 

• Eliminates overnight risks

The biggest benefit of intraday trading is that there's no overnight risk. The trader has to close the position before the end of the trading day to make sure the profitability doesn't change due to any changes during this time. Thus, you won't be affected by any stock market tragedy, global or local, on that particular day.

• Low commission rate

Brokers don't charge a lot when transacting intraday as delivery expenses for transferring securities in an investor's name aren't incurred. In general, brokerage fees charged for intraday trading are one-tenth of those charged for standard trading. To accurately assess and compare the brokerage costs between intraday and standard trading, it's advisable to calculate brokerage using a reliable brokerage calculator.

• Offers higher returns

You can witness amazing profits in a short amount of time when you combine intraday trading with an effective trading strategy. Stock traders often use short selling to generate profits when market conditions are adverse. However, the key here is how you develop and implement your strategy.

• Financial liquidity

One of the benefits of intraday trading is that total financial resources invested can be quickly recovered. There's no blockage through an asset purchase. It preserves the liquidity of an investor to meet his or her own needs. 

• Gains from market fluctuations

Depending on your investment strategy, intraday trading can make you money in bullish or bearish markets. When the market is bullish, you can get capital appreciation by buying and selling stocks. When the stock market falls, short-selling can make you money. 

• Leverage

Among the great benefits of intraday trading is the fact that even those with little capital can start day trading. Often, leverage is used by intraday traders to increase profits. 

Also, some brokers offer quadruple leverage for experienced brokers with accounts worth millions or more. 

Your bank evaluates your financial profile and approves your loan. The same thing happens on the stock market, where a broker evaluates your shareholding record and cash availability. In most cases, the margin is five to ten times the available cash in your account. If your broker gives you a 10x margin, you can buy stocks worth INR 1 lakh with INR 10,000.

• Sell first, buy later

Stocks are usually bought first and sold later by positional traders. However, intraday trading lets you sell stocks first and buy them later. So, you can also trade and profit in a bear market. Short-selling is also possible with futures and options, but capital requirements are typically higher. Thus, intraday trading is potentially your best option if you want to use the ‘sell first, buy later’ strategy to profit.

• Source of money

It should not be difficult for you to turn this into an active source of income if you use the right intraday strategies and dedicate yourself full-time to them. Additionally, in intraday trading, some traders have made a lot of money. Further, to do intraday trading correctly, you need to do extensive research, put in a lot of effort, and decide on the right period and strategies ahead of time.

• Learn a lot

The intraday market is a great way to learn, examine, and apply various trading techniques in a short period, so you can test out various strategies and see which one works for you.

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Advantages and Disadvantages of Intraday Trading

Here are the advantages and disadvantages of intraday trading:

Conclusion

To sum up, intraday trading offers many benefits for skilled traders, including reduced risks, absence of overnight exposure, lower commissions, and potential for short-term profits. However, to get success from intraday trading effective strategies and risk management are required. Overall, while intraday trading demands attention and skill, its potential rewards make it a great option for those willing to invest the effort. Moreover, you have the option to use an online trading app which will help you to improve your skills through various educational resources.