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Introduction
When it comes to stock market trading, investors and traders often encounter two main types of trading: intraday trading and delivery trading. Both these trading styles offer unique features, advantages, and challenges, and understanding their differences is crucial for anyone looking to enter the stock market.
Whether you are a new trader or an experienced investor, knowing the distinctions between intraday and delivery trading can help you align your strategy with your financial goals. In this blog, we will dive into the details of both trading styles, their rules, charges, and strategies, as well as the pros and cons associated with each. By the end of this post, you will have a clear understanding of which trading type suits your style and investment goals.
Intraday and Delivery Trading
The world of stock trading can be complex, but it can be broadly divided into two main categories: intraday trading and delivery trading. Both types of trading involve buying and selling stocks, but they differ significantly in terms of timeframes, strategies, and risk profiles.
- Intraday Trading: Intraday trading, also known as day trading, refers to buying and selling stocks within the same trading day. Traders take advantage of short-term price movements to make profits, closing their positions before the market closes for the day.
- Delivery Trading: Delivery trading, on the other hand, is a long-term investment strategy. In this type of trading, investors buy stocks to hold them for a longer period, ranging from days to years. Delivery trading involves the transfer of stocks to the investor’s demat account, where they are held until sold at a later date.
What is Intraday Trading?
Intraday trading involves buying and selling stocks within the same trading day. The primary objective of intraday traders is to make profits by capitalizing on small price movements that occur during the trading day. Traders aim to open and close positions on the same day to avoid overnight risk.
Key Features of Intraday Trading
- Short-Term Trades: Intraday traders typically make multiple trades during a single day. They rely on small price fluctuations to earn profits, often using technical analysis tools to predict market movements.
- High Leverage: Intraday traders are allowed to use leverage, meaning they can trade with borrowed money to increase their exposure in the market. This allows them to take larger positions, but it also increases the risk.
- No Delivery of Stocks: Unlike delivery trading, where stocks are transferred to the investor’s demat account, intraday trading involves no physical transfer of stocks. Once the position is closed, the transaction is complete.
- Market Timing: Intraday trading is highly time-sensitive. Traders must be aware of market openings, closings, and critical moments during the day when stock prices may move dramatically.
Intraday Trading Time and Timings in India
Intraday trading takes place during the official trading hours of the stock exchange, typically from 9:15 AM to 3:30 PM IST, Monday through Friday. The stock market is closed on weekends and public holidays. Within these hours, traders look for opportunities to execute trades, and it is essential for intraday traders to keep track of these timings for optimal trade execution.
Intraday Trading Stocks List
To be successful in intraday trading, it’s important to choose the right stocks. Stocks that are highly liquid and have significant price movement during the day are ideal for intraday trading. Some of the popular choices for intraday trading include stocks of major companies like Reliance Industries, Infosys, HDFC Bank, and Tata Motors, among others.
What is Delivery Trading?
Delivery trading is a long-term investment strategy where investors purchase stocks with the intention of holding them for an extended period. Investors look for stocks that have the potential to grow over time and deliver capital appreciation. This type of trading is more about taking ownership of the stocks and holding them until a later date when they may be sold for a profit.
Key Features of Delivery Trading
- Long-Term Investment: Unlike intraday trading, which relies on quick profits, delivery trading is a long-term approach. Investors hold stocks in their demat accounts for extended periods, ranging from weeks to years, depending on their investment strategy.
- No Leverage: In delivery trading, investors typically use their capital and do not take on the additional risk of leverage. This makes delivery trading less risky than intraday trading, as there are no borrowed funds involved.
- Transfer of Stocks: Once an investor purchases stocks in a delivery trade, the stocks are transferred to the investor’s demat account. The investor can hold these stocks as long as they want, and the stocks can be sold at a later time when the price reaches a favorable level.
- Capital Gains: Investors in delivery trading earn profits through capital appreciation (increase in stock value) and dividends, depending on the type of stocks they invest in.
Delivery Trading Rules and Mechanisms
In delivery trading, the rules are relatively simple. Once you place an order, the stocks are delivered to your demat account, and you own them. There are no time constraints as in intraday trading. You can sell the stocks anytime, but you should be mindful of any tax implications related to long-term capital gains.
Key Differences Between Intraday and Delivery Trading
While both intraday and delivery trading involves buying and selling stocks, the differences between them are significant. Let’s compare the two in terms of various parameters:
| Parameter | Intraday trading | Delivery trading |
| Timeframe | Same day (buy and sell within the same day) | Long-term capital gain applies aftera long holding period |
| Leverage | Leverage is used to increase exposure | Long-term capital gain applies after a long holding period |
| Ownership | No ownership of stocks; positions are closed by the end of the day | Full ownership of stocks, held in a demat account. |
| Risk | No leverage, trades are made using the investor’s capital | Lower risk as stocks are held for a longer period. |
| Profit | Higher risk due to leverage and short-term fluctuations | Profit is made by the long-term capital appreciation and dividends |
| Charges | Brokerage fees are higher due to frequent trading | Delivery trading charges are lower, as fewer transactions occur |
| Taxation | Short-term capital gain applies | Long-term capital gain applies after long holding period |
Intraday Trading Strategy and Tips
Intraday trading strategies focus on capturing short-term price movements within the same trading day. Here are some effective strategies for intraday trading:
1. Momentum Trading
- Look for stocks with high volatility and volume.
- Trade in the direction of strong price movements driven by news, earnings, or technical breakouts.
- Indicators: Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), Volume
2. Breakout Trading
- Identify key support and resistance levels.
- Enter when the price breaks above resistance (for long trades) or below support (for short trades).
- Confirm with volume to avoid false breakouts.
- Indicators: Bollinger Bands, Volume, Moving Averages
3. Scalping
- Aim for multiple small profits throughout the day by exploiting small price changes.
- Requires quick execution and tight stop losses.
- Works well in highly liquid stocks and indices.
- Indicators: VWAP, Level 2 Market Data, Moving Averages
4. Reversal Trading (Mean Reversion)
- Look for stocks that are overbought or oversold and likely to reverse.
- Buy near strong support and sell near resistance.
- Indicators: RSI (below 30 for buy, above 70 for sell), Bollinger Bands, Fibonacci Retracements
5. Gap and Go Strategy
- Focus on stocks that gap up or down significantly due to news or earnings.
- Enter in the direction of the gap after confirmation from volume.
- Indicators: Pre-market volume, VWAP, Opening Range Breakout
6. VWAP Trading Strategy
- VWAP (Volume Weighted Average Price) acts as a dynamic support/resistance level.
- Buy when the price is above VWAP (bullish) and sell when it’s below (bearish).
- Indicators: VWAP, Moving Averages
7. News-Based Trading
- Trade stocks that react to corporate news, earnings releases, or economic reports.
- Execute trades quickly to capitalize on sharp moves.
- Avoid excessive volatility and whipsaws.
Risk Management Tips
- Stop Loss: Always set stop losses to limit downside risk.
- Risk-Reward Ratio: Maintain at least a 1:2 ratio (risk ₹1 to make ₹2).
- Position Sizing: Avoid over-leveraging and use only a small portion of your capital per trade.
- Avoid Overtrading: Stick to a defined number of trades per day
If you are interested in intraday trading tips, here are some tips to help you succeed:
- Use Technical Analysis: Intraday trading relies heavily on technical analysis, which involves analyzing stock price charts and market data to predict short-term movements. Learning how to read charts, use indicators, and spot trends is essential.
- Manage Your Risk: Intraday trading can be volatile, so it’s important to use stop-loss orders and limit your exposure. Only invest a small portion of your capital in each trade to reduce the risk.
- Focus on Liquid Stocks: Always choose stocks that have high liquidity. This ensures that you can enter and exit trades quickly without significant price fluctuations.
- Stay Updated: Keep an eye on market news, economic events, and announcements that can influence stock prices. Intraday traders need to react quickly to news that may impact the market.
Delivery Trading Advantages and Disadvantages
Advantages of Delivery Trading
- Long-Term Growth: Delivery trading allows you to invest in companies that have the potential to grow in the long run. This strategy is ideal for building wealth over time.
- No Time Pressure: Unlike intraday trading, there is no pressure to buy and sell quickly. You can make well-thought-out decisions without the constraint of daily price fluctuations.
- Dividend Income: Delivery traders can earn dividends from stocks, adding to their total returns.
Disadvantages of Delivery Trading
- Lower Liquidity: Unlike intraday trading, you are not actively buying and selling stocks. Therefore, it may take time to liquidate your holdings when you need the money.
- Risk of Capital Loss: If you hold onto stocks for too long, you may face the risk of the stock price declining significantly, leading to losses.
Best Broker for Delivery Trading
When choosing a broker for delivery trading, several factors need to be considered, including brokerage fees, platform reliability, customer support, and account management features. Some of the best brokers for delivery trading in India include:
- Zerodha: Known for its low brokerage charges and user-friendly platform.
- Upstox: Offers competitive pricing and robust trading tools.
- ICICI Direct: Provides a wide range of services, including research and advisory for long-term investors.
- HDFC Securities: Ideal for those looking for an established, full-service broker.
Intraday Trading Timings in India
Intraday trading occurs during the market’s official trading hours in India, which are 9:15 AM to 3:30 PM IST. This is when stock exchanges such as NSE and BSE are open for trading.
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Conclusion
Both intraday and delivery trading have their advantages, and the right choice depends on your financial goals, risk tolerance, and investment horizon. If you are looking for quick profits with a higher level of risk, intraday trading might be suitable for you. However, if you prefer a more stable and long-term approach to investing, delivery trading may be a better fit.
Regardless of which type of trading you choose, it’s important to stay informed, manage your risks, and continually improve your trading strategies. By understanding the differences between intraday and delivery trading, you will be able to make more informed decisions that align with your financial objectives.
For expert guidance and professional trading insights, connect with Jainam Broking, your trusted partner in financial markets.
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Written by Jainam Admin
March 19, 2025
12 min read
1 users read this article
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