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Difference between Intraday Trading & Delivery Trading

5paisa Research Team

Last Updated: 01 Mar, 2024 05:54 PM IST

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Content

Introduction

Intraday and delivery trading are the two most common trading types in the Indian stock market. While intraday trading is generally for professionals, delivery trading is for everyone. This article will make your task easy whether you want to ace delivery or intraday trading. Read on to know the simple differences between delivery and intraday trading to make informed decisions in the market.

The Top Differences Between Intraday and Delivery Trading - A Primer

Before understanding intraday vs delivery trading, you need to understand the meaning of intraday and delivery.

What is Intraday Trading?

Intraday trading refers to the process of buying and selling shares on the same day. Hence, there will be no holding or transfer of shares to the Demat account. You can either buy first and sell at a profit or loss or sell first and buy at a profit or loss, all on the same day. In some cases, if you do not close (square off) your open position fifteen minutes before the market closing time, your broker may close it automatically against some fee.

Intraday traders usually set a target price before entering the trade. They also place a stop loss to exit automatically if the market reacts differently. Intraday traders enter the market to get quick profits.

What is Delivery Trading?

Delivery trading refers to the process of buying shares on one day and selling at a later date. Even BTST (Buy Today Sell Today) trades are also referred to as delivery trades. When you buy shares on day one, the shares are transferred to your account after two business days. Similarly, when you sell shares, they get debited from the trading account after two working days. Once you buy shares on delivery, you become the rightful owner of the shares, and you can sell them any time you want.

Like intraday traders, delivery traders also set the target before placing trades. However, since they hold the shares, they are in no hurry to close the trade on the purchase date.

What Are The Top Differences Between Intraday And Delivery Trading?

The following sections will explain intraday vs delivery better:

Time

Intraday trading is time-bound. You need to buy and sell on the same day. If you become unmindful, the broker may deduct some fee to sell automatically. In contrast, delivery trades do not come with a time limit. You can sell them anytime, depending on your investment horizon.

Stock Type

Stocks are generally of two types - liquid and illiquid. Intraday traders generally prefer liquid stocks since the volume is much higher than illiquid stocks. As the volume is high, you can buy and sell these shares whenever you want. In contrast, delivery traders can choose both liquid and illiquid shares for investment. For example, some investors invest in penny stocks hoping to strike gold if the price appreciates.

Margin

Intraday traders generally get high leverage or margin from brokers. The leverage facility allows you to buy more shares than your account balance permits you to. For instance, if your account balance is INR 10,000 and your broker give a 10x margin, you may buy shares worth INR 1 lakh. The lender might charge you a fee for providing the margin facility, though. In contrast, delivery trades are mostly cash-settled. You can buy shares only if you have enough clear balance in your account to fund the purchase. However, some brokers provide margin facilities for delivery trades.

Risk

The intraday vs delivery debate reaches a confusing stage at this point. Some investors consider intraday trading riskier than delivery trading. However, unlike delivery trades, there are no overnight risks in intraday stocks. Stock prices depend on multiple factors within or beyond the company's control. And, if there is any negative news after the market closes, the stock may tumble the next day. If you are a long-term delivery trader, the short-term volatility might not affect you much. However, if you are a short-term positional trader, the volatility may be detrimental to your investment objective.

Market Type

Unlike delivery traders, intraday traders buy and sell stocks on the same day. Hence, they can trade in bullish as well as bearish markets. When the market is bullish, they buy first and sell later. And, when the market is bearish, they sell first and buy later. In contrast, delivery traders generally identify opportunities in a bear market and hold them until the stock value increases. They sell stocks during a bull market.

Conclusion

Now that you know the differences between intraday and delivery trading, test your skills with 5paisa's free Demat and trading account. 5paisa charges one of the lowest brokerage fees in the industry. And lower fees also mean higher profit-making opportunities.

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