No delivery of shares in Demat Account
In regular trading, you buy stocks that are physically delivered to your Demat A/c. This means that you have complete ownership of the stock. Intraday trading, however, allows you to take a position on the stock and not completely own it.
Buy & Sell on the same day
Another point of difference lies in the time duration for both forms of trading. Intraday trading happens in a day whereas regular trading does not have a timeline associated with it and the trader can keep the stocks in possession for as long as they want.
Short Selling possible
Intraday trading allows a trader to capitalize on falling markets as well as it has a provision to short sell whereas you cannot do the same in regular trading.
Intraday Trading Advantages
There are various advantages of trading intraday as it provides a trader with a host of opportunities to make a profit from the stock market on regular basis. Let us understand these advantages one by one.
- Intraday trading requires low initial capital as every broker offers leverage on intraday trading as per SEBI & Exchange guidelines. With margin, you can boost your position size with lower capital.
- Due to leverage, intraday traders have a better potential for earning higher returns with the available capital.
- Intraday trades have an option for short selling. Short selling means that a trader is speculating the share prices will fall. They can sell a share first and buy it later. In a falling market, traders can use it to their advantage.
- Invested amount is not blocked beyond a day. Traders get the amount back at the settlement of the trade.
- Intraday traders do not have to deal with gap-up and gap-down scenarios as the trade is settled at the end of the day. If any stock-related news surfaces post-market hours directly impacting the opening price of a share the next day, Intraday traders do not get impacted as much as they don’t have any open position.
Intraday Trading Disadvantages
- Intraday trading is squared-off on the same day and the time available to a trader to achieve their targets is lesser.
- If there is a volatile move in the share price opposite to the trader’s position, the time for recovery is very little. The trader may have to accept losses for that trade.
- Leverage is a two-edged sword that intraday traders need to be careful of and manage diligently. It can be alluring for any trader, but it can result in significant losses if not managed well.
- The daily involvement to monitor and adjust the trades is higher for intraday traders. They must be actively involved in analysing the charts and patterns and set their targets accordingly.
- Benefits such as dividends, bonuses, and voting rights are not accessible to intraday traders.