- Date : 30/11/2023
- Read: 3 mins
Delivery trading comes with several advantages and disadvantages. This style of trading is important for long-term investors.
If you have purchased and are holding shares in your demat account, it is known as delivery trading. In other words, if you use your money to buy some shares, and keep it for a few days, weeks, months or years, you have taken the delivery of the shares.
Delivery trading cannot be carried out at reduced share value, unlike margin trading
High delivery volume is an indicator of actively traded stocks
Delivery trade attracts costs like exchange transaction charges and SEBI turnover fees
What is Delivery Trading?
Delivery trading is the purchase of shares and their subsequent transfer to your demat account. It is the opposite of intra-day trading where you buy and sell shares within the same day. You do not own the shares at the end of the session, and therefore, there is no reflection on your demat account.
Carrying Out A Delivery Trading Transaction
Delivery meaning in the stock market is quite simple. As are the delivery trading rules. If you want to buy 10 shares of Rs 100 each, you must have Rs 1000 in your demat-cum-trading account. You part with the entire value of the transaction, i.e. Rs 1000, and buy the shares. Once the buy order is executed, your fund is deducted from your account. The time taken for your buy order and a matching sell order to get settled is known as the settlement period. Once the settlement is done, the 10 shares will be reflected in your demat account.
Why Choose Delivery Trading?
Taking delivery in the share market has a few important advantages.
Ownership – By taking delivery in the stock market, you get ownership control of the shares. You can sell the share as per your will and on any given day.
Lower risk – Since you took delivery, you can take time to ensure that you execute a profitable sale. In intraday trading, you are under pressure to sell the share within the day. This can sometimes lead to a trading loss.
Investing – You are investing your money in a company’s growth. As the company grows, your share-holding value increases. You will also receive dividend income against the shares held, as and when a dividend is declared.
Pitfalls Of Delivery Trading
The costs of delivery trading are higher compared to intraday trading. This includes a higher brokerage fee and securities transaction tax.
Unlike derivatives trading and intraday trading, you cannot trade with a portion of the share value in delivery trading. You must have the full share value to enter into a delivery trading transaction.
To gain the long-term benefits of stock market investment, delivery trading is necessary. Always calculate the costs and profits of a delivery trade before executing it.
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