Intraday is another way of saying “within the day.” Here stocks are purchased, not with an intention to invest, but for the purpose of earning profits by harnessing the movement of stock indices. Thus, the fluctuations in the prices of the stocks are harnessed to earn profits from the trading of stocks. Intraday Trading is also referred to as Day trading by many traders.
Why many traders find Intraday Trading attractive
- The stocks traded under the day trading segment have very less brokerage charges than Delivery segment.
- Intraday trading offers higher margin (eg. If you have Rs.5000 in your account, you will be allowed to do transactions worth multiple times of this value. This ratio varies as per the policy of the Brokerage firms. Some of the brokerage firms even allow upto 10 times margin)
- They do not want to carry their positions overnight as the stock price might be impacted due to some other event and open with a gap up or gap down the next day.
Cash trading is a method of buying or selling securities by providing the capital needed to fund the transaction without relying on the use of margin. It is the most common form of share trading. Cash trading is achieved using a cash account, which is a type of brokerage account that requires the investor to pay for securities within two days from when the purchase is made. Cash Trading is also commonly known as delivery-based trading since the stocks are deposited in the trading account of the investor.
Margin trading is a concept which allows you to buy more securities than what you can buy with capital in hand. It’s like a loan from your broker or exchange. A margin account is a loan account by a share trader with a broker which can be used for share trading. The funds available under the margin loan are determined by the broker based on the securities owned and provided by the trader, which act as collateral over the loan.
The broker usually has the right to change the percentage of the value of each security it will allow towards further advances to the trader, and may consequently make a margin call if the balance available falls below the amount actually utilised. In any event, the broker will usually charge interest, and other fees, on the amount drawn on the margin account.
For cash market, generally brokers provide the margin and charge nominal interest for the same. While for Futures market, exchange provides the margin and there is no interest charged. Every broker and exchange have different margin policies.
PCEX offers intraday, margin, cash and delivery market. Intraday trading is an alternative for those who are not interested in long term investing or more specifically delivery trading. This is a place where thousands of small investors try to make a fortune every day, by tracking minute by minute change in share prices.
Buying on margin involves borrowing money from a broker to purchase stock. A margin account increases purchasing power hence it is used by long term investors.