Why people do Intraday Trading
Intraday trading is itself a type of stock market trading that is preferred by most of the full-time traders who dedicate their full time to trading. When it comes to choosing to become an intraday trader, you will get multiple suggestions from people who are already in a trading career. Even people who are very successful in stock markets will give unsuitable answers for intraday trading.
When starting a trading career, the obvious and most popular suggestion anyone gets is to become an investor rather than a trader. The investor studies the fundamentals and invests in the stock market with a long term perspective usually from few months to few years. But when it comes to a trader, he wanted to make use of the short term move in the price of the stock and exit making enough profits from the movements. The focus of the trader is short term and for the investor, it is long term.
From the majority of people, we get the answer that Intraday trading is very risky and it is difficult to predict the price movement direction in the short term. But choosing Intraday trading has its own advantages and disadvantages. If you are ready to take risks and has enough capital to meet the needs and proper tools for the analysis, then you can with high-risk apatite for high rewards can choose the path of intraday trading.
In this artile we will discuss the Reasons why Intraday trading is better than the conventional Investing in stocks for long term.
Reasons for Intraday Trading
- Benefits of Margin
- Benefiting from both directions movement
- Unworried about overnight effects on the market
- Regular source of income
Benefits of Magin
When it comes to the intraday market, almost all the brokers provide a huge margin for buying and selling shares, and this margin may vary as high as 40 times depending on your broker. There are brokers who provide a very high margin for the users to benefit from intraday trading. With a high margin, you need a very less amount of money to buy a large number of shares. For example with a margin of 10 times, you just need 1000 rupees to buy shares worth rupees 1 lakh. With such a high margin, you can buy a large number of shares and hence make a high profit from the price movement.
But keep in mind, with a high margin comes the risk of high loses if the prices move in the direction against out position. Hence you always keep in mind to keep a stock loss to restrict yours loses in intraday trading.
Benefiting from both directions movement
when you have a long term view on a particular stock, you can only buy the shares of the company and hence benefit from the price upward movement. But when it comes to intraday trading, you can buy if you believe that the price will go up and you will sell the shares without even owing the shares if you predict that the price will move down. And accordingly, you can make a profit if the price moves in the direction you predicted. But from a long term investment perspective, if you predict that the price will go down, you will have no method in equity markets to benefit from such downward price movements.
Unworried about overnight effects on the market
It happens that the conditions about a particular stock and sometimes even the entire market mood changes overnight and over the weekend when the markets are closed. and with the opening of the market, the price may change rapidly against our position direction. But for a intraday trader, this will not affect much as he will close all the positions before the closing of the market and will not hold any positions overnight. Hence not worried about the overnight market mood changes.
Regular source of income
From investing in stock markets for a long time, you have to wait for such a long period to make profits from the price movements until the price reaches your satisfying levels and then only you can sell the positions and make profits.
But when it comes to the intraday trader, you can make consistent profits which can serve as a regular source of income and with proper trades you can earn high profits every month if you are a net profitable trader within that period.
The stock market itself is a rick involved platform and in every instrument you chose and in every scheme you may opt for, there is a margin of risk that is involved. In a similar manner, intraday has its know risk factor with the possible rewards factor. So from all the points that are listed above, we can conclude that if one wanted a regular source of income from the stock market and has a risk apatite which has a potential for good rewards, they can choose intraday trading and can use proper platforms and analysis to learn and grow in the market.