Intraday Trading vs. Delivery Trading: Which is Better?

There are many different approaches, each with its own unique advantages and risks, that you can adopt to trade in the Indian financial markets. Two of the most popular trading approaches that a large number of market participants opt for are intraday trading and delivery trading. 

Both of these methods have distinct characteristics and cater to different investment goals and risk appetites. In this article, we'll explore what delivery and intraday are and discuss which of these two approaches might be better suited for you.

What is Delivery Trading? 

Delivery trading involves purchasing the stock of a company and holding onto it for more than a day. Most delivery traders generally tend to hold the stock for weeks to months, whereas others may choose to only hold it for a few days to capture the short-term price movements in an asset. 

Let’s say that you purchase the stock of a company and don’t sell it within the same day. After the end of the trading session, the stock exchange sends the details of your executed trade to the clearing corporation, which credits (delivers) the number of shares you purchased to your demat account. Once the delivery is complete, you will be able to view the purchased shares on your demat account and in the holdings section of your trading platform. These shares will continue to remain in your account until the day you decide to sell them. 

Delivery Trading: An Example

Now that you’ve seen what delivery trading is, let’s take a hypothetical example and see how it works.

You believe that the shares of Reliance Industries Limited are likely to rise shortly. To capitalise on the short-term price movement in the asset, you purchase 100 shares of the company at Rs. 2,800 per share. Once the trading session closes, the 100 shares of Reliance Industries you purchased will be delivered to your demat account by the clearing corporation within 24 hours (T+1) from the end of the trading session. 

Your demat account will safely hold the 100 shares of Reliance Industries until the day you sell them. When you do eventually sell them, the clearing corporation will debit the sold shares from your demat account and deliver them to the demat account of the buyer. 

What is Intraday Trading? 

Intraday trading involves purchasing and selling stocks within the same trading day. Unlike delivery trading, traders adopting this approach do not hold onto their positions overnight. 

The primary aim of intraday trading is to profit from the price movements that occur within a day. It requires traders to leverage volatility in the market to execute quick trades and capture small price fluctuations. 

However, since the stock is purchased and sold within the same trading session, day trading involves constant monitoring of the markets. This approach also requires the use of technical analysis, chart patterns and indicators to identify short-term trading opportunities and make rapid buying and selling decisions.

Intraday Trading: An Example

As with delivery trading, let’s also take a look at a hypothetical example to understand how intraday trading works. 

Let’s say that you’ve been following the price movement of HDFC Bank Limited. The stock has recently been exhibiting increased volatility and liquidity. You decide to leverage this market behaviour to generate profits and purchase 50 shares of HDFC Bank Limited at Rs. 1,500 per share at around 10 AM on a particular day.

As the day progresses, the stock price of HDFC Bank continues to rise, reaching Rs. 1,600 per share by 2 PM on the same day. Since you’ve reached your profit target, you decide to exit your position by selling 50 shares of HDFC Bank, enabling you to lock in a profit of Rs. 5,000 [50 shares x (Rs. 1,600 - Rs. 1,500)]. 

Which of the Intraday Trading and Delivery Trading Approaches is Suitable for You?

The answer to the question of whether intraday trading or delivery trading is better depends on various aspects. Here are a few key factors you need to consider before you decide which of these two approaches is more suitable for you.

1. Investment Horizon

If you’re seeking to generate short-term profits from quick price movements that occur during a day in an asset, then intraday trading may be more suitable for you. On the other hand, if you have a slightly longer-term outlook and are willing to hold onto stocks for extended periods, then you may find delivery trading to be more suitable. With delivery trading, you may need to stay invested and allow time for fundamental factors to drive stock prices. 

2. Risk Tolerance

Comparing the two trading approaches in terms of risk, traders generally consider delivery trading to be less risky than intraday trading. This is because delivery trading involves holding onto stocks through market fluctuations, which reduces the impact of short-term volatility. Intraday trading, meanwhile, is more susceptible to short-term volatility and requires active risk management strategies to prevent capital loss due to rapid and unexpected price swings. 

Therefore, if you have a very high tolerance for risk, intraday trading may be the right approach for you. However, if you cannot digest short-term volatility, you may consider opting for delivery trading. 

3. Market Knowledge and Expertise

For delivery trading to be successful, you often require knowledge of both fundamental and technical analysis. In contrast, intraday trading relies heavily on technical analysis, chart patterns and market indicators to identify short-term trading opportunities. 

4. Time Commitment

If you prefer to adopt a more passive approach to trading with fewer trades and less time spent monitoring market movements, delivery trading may be the right option for you. That said, if you prefer to actively participate in the markets throughout the day and have enough time to monitor the markets continuously, you could consider intraday trading.

5. Psychological Factors

Both delivery trading and intraday trading can be psychologically demanding. If you have the emotional discipline to remain patient during market fluctuations and the mental fortitude to avoid making impulsive decisions based on short-term price movements, then delivery trading may be the ideal approach for you. On the other hand, if you have discipline, focus and the ability to make quick decisions within a very short time frame, intraday trading could be a more suitable approach. 

Conclusion

Both delivery and intraday trading are two distinct approaches, each with its own set of benefits and risks. However, you must carefully assess your goals, risk appetite and market expertise before deciding which strategy aligns best with your financial aspirations. 

Irrespective of the approach you choose, the Research 360 platform powered by Motilal Oswal has all of the tools and features you need to increase your chances of profitability. With the Screeners feature of the platform, you can quickly filter stocks for both delivery and intraday trading on the basis of a plethora of different criteria. Additionally, you can also use the Result Analysis and Research Report functions of Research 360 to gain fundamental insights into companies. 

So, sign up for the Research 360 platform today and get exclusive access to all of the various features and tools designed to make your trading experience more seamless.