What is Delivery Trading?
With a proper plan in place and active risk-management, Delivery trading can be one of the effective ways to make long-term gains in the stock market.
There are several benefits of delivery trading; however, there are also certain charges you will need to consider before you begin.
Delivery trading is a term used to describe stock market investments wherein you hold shares for a limited period and sell them later with an aim to generate profit. With Delivery Trading, you get to invest in stocks for a term more than 1 day or you can choose to stay invested for a long term.
For example, let’s say you buy shares worth Rs.1000 of an XYZ company. Once the transaction is complete, XYZ shares worth Rs.1000 are credited to your Demat account after settlement. In delivery trading, you will have to hold these shares for at least a day or longer and sell them at a suitable opportunity. Unlike Intraday Trading, Delivery Trading doesn’t allow you to buy and sell shares on the same day.
This article will cover all about delivery trading and carve a path for you to get started. The advantages of delivery trading, the associated charges, and understanding the difference between intraday and delivery trading are also highlighted. Read on to learn more!
How to Start Delivery Trading?
To start delivery trading, you must open a Demat & trading account with a stockbroker like Bajaj Securities.
Here are the steps you need to follow while opening your Demat and trading account with Bajaj Securities:
- Visit "bajajfinservsecurities.in"
- Click on "Open Account."
- Enter personal details like name, phone number, and email ID
- Fill in all the bank details of the account you want to link with your Demat & trading account
- Select a subscription plan
- Upload address and identity proof (i.e., Adhaar card/driving license/passport), PAN card, and canceled cheque
- Upload a video while reading a provided script or pre-recorded script for in-person verification
- Review your details and digitally sign the form. Enter OTP to validate
- Submit the form to receive your login details
- Add funds to your Demat account and start trading
Once you have opened your Demat and trading account, you can start scanning for stocks you wish to invest in. Also, before investing you must look at the company’s past performance as well as its growth potential.
What are the Advantages of Delivery Trading?
- Control: Delivery trading gives you control over the purchased stocks. So it’s up to you when to sell and how much.
- Long-term benefits: Delivery trading allows you to reap the long-term benefits of investing in stocks. Suppose a company has a good track record and expected growth. In that case, its stock price will likely increase over time, allowing delivery traders to benefit from this long-term appreciation.
- Lower risk: Since delivery trading involves holding investments for extended periods, it is less risky as compared to other trading formats.
- Higher returns: With delivery trading, you have ownership of shares which means you will also be eligible for dividends and stock bonuses. These can act as a source of income until you sell the shares. Also, by holding shares for a longer period, you can accumulate more dividends, providing a good chance of getting high returns from your investments.
Delivery Trading Charges and Minimum Margin
The charges associated with delivery trading vary from broker to broker. These charges include the following:
Brokerage Fees
Your stockbroker will charge you a brokerage fee on all your transactions. This fee can be a fixed amount per order or variable brokerage based on transaction value of the order.
Securities Transaction Tax (STT)
STT is a tax levied by the government on all trades through the stock market exchange.
Exchange Transaction Charges
These are additional charges imposed by NSE/BSE to perform the trade.
SEBI Turnover Fees
The Securities and Exchange Board of India (SEBI) levies a turnover fee of 0.00010% on all delivery trades.
Margin Trade Funding
Margin trading enables investors to purchase more shares at a lower price. Here, the broker pays the balance amount and charges an interest. The amount paid by the investor is called the margin.
Intraday Trading vs. Delivery Trading
Although intraday and delivery trading are different forms of market entry, they have similarities involving buying and selling stocks. But the primary difference between the two is that intraday traders buy and sell their stock within the same day and seek to profit from short-term price movements of stocks. On the other hand, delivery traders aim for long-term gains.
Intraday trading allows traders to take advantage of small fluctuations in stock prices without taking ownership of the underlying asset. Whereas delivery trading requires a longer-term view as it involves taking delivery of the shares and wait for its value to appreciate over time.
Conclusion
Delivery trading gives a lucrative opportunity for those looking to make long-term gains in the stock market. It involves a comparatively lower risk, and holds the possibilities of a higher returns. However, delivery traders must consider the various charges before they enter a trade.
You will need a Demat and trading account before you start delivery trading. Open your Demat and trading account with Bajaj Financial Securities Limited for free and save up to 99% of brokerage charges.