Intraday trading means the daily buying and selling of financial products. Depending on your preference, you can either buy the shares in the morning and trade them before the market shuts at 3:30 pm. You can apply for IPO, sell the stocks first, and then place a buy order before that time. Because of the market volatility, intraday traders profit. This is both helpful and risky at the same time. By engaging in intraday trading, you have the potential to make a sizable profit or lose a significant portion of your investment. Knowing the benefits and drawbacks of day trading is essential as it’s important to know each side.
Benefits of Intraday Trading
The following are some benefits of intraday trading:
You can trade with a small amount in your Demat account, which is one of the main benefits of intraday trading over other types of trading. Margin is a feature that many stock brokers offer to their clients. It allows them to buy or sell securities worth a significant sum for a relatively small sum. As a result, intraday trading makes it possible for a trader to purchase stocks worth 100 rupees with just 10 rupees.
Sell stocks quickly and buy when the market declines.
In short-selling, traders can close out a transaction by first selling stock and repurchasing it later in the same quantity. This enables you to profit even in markets that are declining. This strategy is prohibited, at least for the cash part, in other trading styles like swing trading and medium-term trading.
Avoid Overnight Risk
When the markets close for the trading day, all your earnings are deposited as cash into your account. You do not need to wait until the following day in order to withdraw it and use it as you choose. Each day offers you a fresh start; forget about your previous victories and defeats and begin over. Since you withdrew all of your money at market closing, there is no chance of overnight events that could influence your investment in the markets.
Have a Reliable Source of Income
If you have experience trading intraday and consistently place profitable transactions, intraday trading may be able to provide you with a reliable stream of income to cover your daily costs.Unlike long-term investments, you do not have to wait for prices to rise again and volatility to fall before taking profits. Your earnings are available for daily withdrawal as hard currency.
.You might have enough money to engage in other types of frequent trading. Your trading capital may be heavily leveraged. Trading has the ability to generate money quickly by benefiting from market volatility and requires a smaller initial investment.
Drawbacks of Intraday Trading
The following are the major drawbacks of Intraday Trading:
Risk-Reward Ratio: High
The majority of traders acknowledge that intraday trading is among the most profitable but also the riskiest types of trading. Technical indicators and price action are typically the two strategies that intraday traders use. The entrance and exit locations are marked on the chart by price-action traders using support and resistance lines. On the other hand, technical traders use tools like the RSI, MACD, DMA, SMA, and similar indicators to discover trading opportunities. Therefore, thorough research is essential to reducing intraday trading risks.
Trading intraday is a difficult art. Additionally, unlike long-term or positional trading, you are unable to exit from the mobile app before closing a position. Although you can set a target and stop loss and return to your full-time job afterward, this strategy is not sustainable over the long term..A stock may reach the stop loss before reaching the target on occasion.Or it could retrace its steps and hit the stop loss just inches away from the target price You may be able to prevent these issues and trade professionally by remaining fixated on the price action.
Extreme Volatility Could Stress You Out
A stock that is fluctuating violently may be visible on the 1-minute, 3-minute, or 5-minute charts. But the fluctuations will appear more orderly and predictable when you view a 30-minute chart or a daily chart. Therefore, if you dislike volatility, avoiding intraday trading can be a wise choice.
Highly Reliable Tipsters
Investors are more vulnerable to risk in intraday trading because less capital is required, and any wrong decision could result in the loss of their entire capital. A trader’s mental health suffers when they lose intraday trades. As a result of receiving free intraday trading suggestions from multiple WhatsApp and Telegram groups, the majority of traders lose money since they trade frequently.
The days are not all the same.
You could lose all of your money in a single day if the market moves against your trading position. Trading intraday is not profitable every day. The stress level is very high during intraday trading. The same level of care must be taken at all times as when applying for an IPO. Dividends and incentive benefits are not provided. Due to how much time you have to spend in front of a screen watching the market, day trading might get boring.