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Pros and Cons of Intraday Trading

By Research Desk
about 10 years ago

In the Indian share market i.e. BSE and NSE, Intraday trading is all about trading shares on a single day. It could mean buying and selling or selling first and then buying the same shares again before the closing down of the trading session at the day end. This way your amount invested is not blocked.

 

The whole essence of Intraday trading involves gaining through the volatility in BSE and NSE stocks. Thus, if the share market is in red (going down), one can sell the stocks and later buy them at the end of trading day, when prices have fallen. Conversely, if the trend of NSE or BSE stocks is positive, then they can be bought at a lower price at start of trade and sold once price has risen, later during the share market trading session.

 

Few Pros of Intraday Trading:

  1. Less amount of capital required as compared to investment or delivery based trading.
  2. Relative returns can be higher, since daily returns are realized.
  3. One can multiple their money fast, when share market is showing lot of volatility.

 

Few Cons of Intraday Trading:

  1. High return, but high risk: Intraday trading on BSE and NSE can give high returns, but involves high risk too. Hence, those with Conservative or Balanced portfolio must limit Intraday trading, to say 10-20% of their share market portfolio.
  2. Easy trap – termed as ‘gambling’ in the sharemarket, if no basic knowledge of companies listed on NSE and BSE.
  3. Intraday trading may be a confusing, stressful and difficult job and is not advisable for those who do not understand the market strategies, the trends and those who cannot gauge the future performance of the shares based on the company strategies. Thus, going through company profiles and news releases is important, calling for a lot of reading and research. All this with in-depth study of the share market investing process, technical details about selling, buying, maintaining accounts, dealing with brokers etc.

 

Thus, Intraday trading on share market is a double-edged sword. Hence, one must weigh the pros and cons carefully and judge its suitability.