Advantages And Disadvantages Of Intraday Trading
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- Updated 23 Jun 2023
Intraday trading leads a the trader opens and closes a position on the same day. It requires discipline, money management skills, risk-taking ability. So when a trade signal occurs you act without hesitation and also according to your trading plan.
Read more: Is intraday trading taxable in India
Let’s look at some of the pros and cons.
Pros Of Intraday Trading
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You require less principal amount in intraday trading as compared to investment.
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You have the potential to make substantial profits as you don’t have to wait long durations for profits.
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You can gain more money when the stock market is showing a lot of volatility.
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As an intraday trader, you do not require to lock-in your money for a long time. With this, you can have money to make other frequent trades.
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Day trading leads to lower risks which means if you are holding at least 5 small positions you will be frequently going long and short at the same time. This indicates that at least one side of your portfolio will make money.
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You can have high leverage on your trading capital. This leverage facility varies from broker to broker.
There are chances that amateurs can also lose money quickly. Take a look at the cons to know the risks involved in intraday trading as well.
Know Your Needs
Before you start trading or investing in the share market, understand your investment purpose, risk appetite, and limitations. Add up all your income and deduct all your expenses, and then, dedicate the remaining amount to your investments. Remember that stock market investments are associated with some amount of risk. So, you should be willing to take a certain amount of risk.
Cons Of Intraday Trading
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When you are making money faster there is also a scope of losing money faster. So there is no fixed salary on which you can depend.
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When you are overconfident with a couple of good trades or else if you are losing you might be psychologically affected. This can take a toll on your health.
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The moment you start ignoring your trading diary and trading plan, your success as an intraday trader is difficult.
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You will not succeed if you try to make money by tips or titbits from your WhatsApp groups. Here, you need to work on charts, understand structures and learn to put your own trades independently.
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You can lose money on all your positions if the market makes medium term counter trend move.
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You can be difficult to make massive returns when the market is trending very strong.
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You know that your career is a lonely one as you sit at home staring at the computer.
Therefore, intraday trading has its own share of pro and cons. But, what makes intraday trading an option to explore it as a profession is the fact that you can make money provided you can afford to take risks.
