What Is Intraday Trading vs Delivery Trading?

In stock markets, trading happens in two styles: intraday trading and Delivery trading. Both these trading styles involve buying and selling the same available shares. However, they differ in strategy, risk, fund requirement, and, most importantly, time horizon. Both of these trading strategies have their own merits. As an investor, you need to choose which suits you best for your financial goals and risk tolerance, and most importantly, which trade pattern you understand better. Let’s understand both of these trading styles in detail.

What is Delivery Trading?

When you buy any shares and hold them for more than one day and sell them any time after that, maybe a week, a month or years, it is delivery trading. The primary objective of delivery trading is to capitalise on the long-term growth prospects of the share value. Here, the purchased shares get transferred to your Demat account and you gain ownership in the company. You are also entitled to dividends whenever the company declares them during your shareholding period.

Delivery trading is most common across all investor categories, be it seasoned or novice. Everyone intends to capitalise on the long-term growth potential of the share value. For a novice investor, understanding delivery trading is really simple. Buy the shares and hold for a certain period. Investors just need to analyse the overall company’s fundamentals, sector dynamics and overall growth prospects.

It must be noted that the margin facility, which allows traders to trade for higher values than the available money, is not available for delivery trading.

What is Intraday Trading?

Intraday trading, as the name suggests, involves buying and selling shares on the same trading day. Whatever shares you have bought must be sold before 3:30 pm. If you do not sell, the broker automatically sells them for you. The bought shares are never carried forward to the next day. The objective of Intraday trading is to make quick profits by capitalising on the volatility of the share value.

Here, the shares never get transferred to your Demat account and hence, you never get ownership in the company. Brokers provide margin or leverage, which allows you to trade for higher values than the money you have, to intraday traders.

Example of margin trading, say if you have Rs. 1lakh, and the broker allows 4 times margin, you can trade up to Rs. 4 lakh with the Rs. 1lakh. The profit or loss incurred is multiplied by the same margin multiplier factor.

Intraday trading requires you to constantly monitor markets, apply technical analysis, make quick decisions and apply disciplined stop losses. Traders heavily rely on charts, patterns and indicators to predict short-term price movements.

Differences between Intraday and Delivery Trading

FAQs

What is the main difference between intraday trading and delivery trading?

Intraday trading involves buying and selling shares on the same trading day, while delivery trading involves holding shares for more than one day. Delivery trading gives investors ownership of the shares, whereas intraday trading focuses on short-term price movements.

Is intraday trading riskier than delivery trading?

Yes, intraday trading generally carries higher risk because of rapid price fluctuations and the use of leverage. Delivery trading can offer a longer investment horizon, although it is also subject to market risks.

Can beginners start with intraday trading?

Beginners can explore intraday trading, but it requires market knowledge, technical analysis, quick decision-making, and disciplined risk management. Delivery trading is often a more suitable starting point for beginners who want to understand the stock market.

Do I get ownership of shares in intraday and delivery trading?

In delivery trading, purchased shares are credited to your Demat account, giving you ownership in the company and potential eligibility for dividends. In intraday trading, positions are closed on the same trading day, so shares are not held as delivery investments.

Which requires more capital: intraday trading or delivery trading?

Delivery trading generally requires the full amount needed to purchase shares. Intraday trading may offer margin or leverage, allowing traders to take larger positions with less upfront capital. However, leverage can magnify both profits and losses.