What are the four benefits of intraday trading?
In trading parlance, intraday trading or day trading refers to when positions are opened and liquidated on the same day.
The four main benefits of intraday trading are:
No Overnight Risk
A noteworthy aspect of the stock market is the overnight risk. Overnight risk refers to when there is a risk that a stock’s price may decrease/increase the following day while you are still holding it in your trading or demat account.
Since traders start the next day with no open positions, they eliminate the risk of overnight factors influencing their trade.
In day trading, since the trader must terminate the position before the conclusion of the trading day, the profitability is guaranteed to be unaffected by any events or movements that occur during this time.
Therefore, any stock market news, whether it is local or worldwide - such as after trading hours announcements or US markets in the evening, will not jeopardise your gains on that specific day.
Potential to Earn in Bear Market
With the use of appropriate trading tactics, intraday trading can produce significant gains for traders.
In a booming stock market, capital appreciation is simple to attain. However, intraday share traders utilise the short-selling strategy in unfavourable market circumstances to generate profits as well. This is the reason why serious traders use day trading to grow their capital and earnings are redirected to invest for the long term. Yet, intraday remains the base for most expert traders.
Quadruple Leverage
Intraday traders frequently use leverage to boost their profits. In the stock market, a broker assesses your shareholding history and cash position before approving a margin amount. The amount of margin might range from four to 10 times the amount of cash in your trading account.
High leverage being an advantage of intraday trading will thus help increase the potential to earn more money, which is why it is one of the significant intraday benefits. You can start day trading with low capital as well, and take advantage of leverage if you are confident in your analysis.
Great Opportunity to Learn
Intraday undoubtedly provides a valuable platform for learning, examining, and using numerous trading methods. You can experiment with the tactics to see which one works best for you. This is also an intraday trading advantages. It can be a good learning platform for newbie traders looking to have a quick learning curve in the stock market. Nothing teaches you like failures! It is important though to restrict your capital in the initial days of your day trading journey, so that you do not expose yourself to significant losses.
What is Intraday Trading
Intraday trading refers to the buying and selling of stocks within the same trading day. In this type of trading, positions are squared off before the market closes, and no actual delivery of shares takes place. The primary objective of intraday trading is to capitalize on the price fluctuations in the stock market within a single day. Traders use various strategies, such as technical analysis, to identify the best stocks to trade during the day. The benefits of intraday trading include the potential for quick profits, the ability to leverage positions, and the avoidance of overnight risk, which can be influenced by global events or market developments. However, there are risks associated with intraday trading as well which needs to be kept in mind while trading.
Conclusion
Although numerous benefits of intraday trading exist, newbies must proceed carefully and cautiously. Knowing your risk appetite, conducting the necessary research, and having the patience to see your trading plans through are essential for being a successful trader.
The trading adventure will go more smoothly if you have the backing of a professional broker with access to the correct information and cutting-edge charting tools, all being the advantages of intraday trading.