Intraday Trading and Long-term Holding, you get two options to enter the stock market and make money from it. One, you could trade shares using the intra-day trading. Two, you can stay invested in the share market for a long duration to generate high returns.
Both forms of investments are associated with certain pros and cons. You could either hold the shares for years or trade and sell them on the same day you purchased these shares.
Let’s understand both concepts in detail.
How Intra-day Trading and Long-term Holding Differ?
Investment in the share market can be defined as holding the shares of a company for a long period. Usually, people keep these shares for a period of 3-5 years (if they opt for long-term investments).
Intra-day trading, on the other hand, means you could sell all your shares within the same day. This means you don’t hold on to the shares for days, let alone keeping them for years.
· Holding Period
As mentioned before, investment and long-term holdings include the shares that are held for many years. The market fluctuations are common in the long-term holdings, but that has no impact on your investment.
Now, you can hold these shares for decades. There is no maximum limit. Intraday trading hours are different. You are supposed to sell all the shares on the same day before the closing period. You hold these shares for a few hours only.
· Capital Growth
The trader sells the shares as soon as the stock price moves in their desired direction. Let’s say you purchased 10 shares worth INR 100 from a particular company. You sell these shares as soon as the price increases to INR 150.
That way you earn a profit of INR 500 from the sale of 10 shares. If the price of the stock decreases, you could put a stop loss to reduce the amount of loss you bear.
Long-term investments do not involve a quick sale. You don’t sell your shares if its price increases by a small percentage. You rather hold on to that for several years. In other words, the price fluctuations do not affect your long-term investment decisions.
· Level of Risk
Intraday-trading and long-term investments are associated with risk. The risk is higher in intra-day trading since the price fluctuates quickly. You have only a short amount of time to sell the shares. There is high price volatility involved in the intra-day trading as compared to the long-term holdings.
The latter involves risk, but that’s comparatively lower than intra-day trading. Long-term holding gives investors an opportunity to grow their money by earning dividends and making the best of the price appreciation.
· Investor’s Profile
Timing is everything in intra-day trading. If you fail to track the price of the stock, you will lose the deal. That’s because the price of the shares of any company fluctuates every minute.
Basically, you are supposed to keep an eye on the stock exchanges 24/7 to ensure that you don’t miss the right opportunity. Long-term investors focus on the credibility of the company. The small fluctuations in the price do not make them suffer losses. They stay invested for a longer duration. They keep the shares for many years.
Intraday Trading or Long-term Holding – Which is better?
You could earn significant profits from intra-day trading, but it involves a high level of risk. There is a chance you could end up selling your shares at a lower price by the end of the day.
Long-term investors generate high returns, but there is a risk the company might underperform. So, both types of investments include risk. The best option depends on your risk appetite.
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