Up until now, your image of the harried stock trader may be limited to what you've seen portrayed in movies – or antacid commercials. So if you're about to enter the fascinating world of stock trading, you're wise to take it slow and survey the different ways of trading, particularly with regard to intraday vs. interday trading. Keep in mind that popular images reflect the traders who work at some of the biggest stock exchanges in the world, and you're probably going to be buying and trading stocks from the privacy of your comparatively low-key office. In the end, you may need to pop the occasional antacid, but then, you can always alter your trading strategy to better suit your tolerance for risk.
Learn the Essence of Intraday Trading of Stocks
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"Intraday trading" is a longer way of saying "day trading," and the people who participate in it are called day traders. They purchase and sell stocks while the exchanges are open, or from 9:30 a.m. to 4 p.m. All trades are settled at the end of the day, before the exchanges close. (By contrast, the "trading window" of interday trading is longer, meaning several days or more.)
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Day traders make money based on the difference between opening and closing stock prices, so investors who seek a quick profit from those changes may be drawn to intraday trading, Periodismointegrado World Finance says. Two other factors contribute to the appeal of this trading strategy: One, stock market rules afford greater leverage to day traders since they can use margin loans to cover some of their costs. And two, day traders don't have to worry about late-night or early-morning news rattling the financial markets. Historically, government job reports, cost-of-living updates and political crises are the cause of many effects that trickle down to the markets.
Consider also: How to Avoid Day Trading Penalties
Take a Closer Look at Intraday Trading of Stocks
The availability of margin loans may be all the incentive you're looking for to become a day trader. Groww says it also offers other advantages, including:
Lower risk of substantial losses, by virtue of the limited trading time.
The potential for higher profit, as long as a wise investment strategy is followed. The practice of "short selling" can yield "massive wealth," which is part of the strategy's allure.
The ability to make a profit in both good and bad (or "bull" and "bear") markets – again assuming that purchases and sales are rooted in a sound strategy.
Lower fees, which are generally one-tenth of those assessed on standard trading.
These advantages point up two truisms about stock trading, and especially intraday trading: Volatility in the market can turn that potential for "massive" wealth into a reality – or it can result in crushing losses. It takes more than a bottle of antacid to stave off the anxiety and leaven the giddiness of "playing the markets" to try to generate a profit. Any level-headed investor would do well to study the stock market, understand key events in its history and, perhaps, "shadow" a trader for a day to gather some helpful insights.
Consider also: Why Does a Stock Not Trade for a Day?
Reflect on Interday vs. Intraday Trading
The advice applies to interday trading, as well, though many people assume the risks can be mitigated by virtue of the fact that trading takes place over a longer period of time. This assumption may turn out to be true – or not. The outcome depends on the value of the research and analysis that undergirds the essence of interday trading. In particular, you must be willing to spend significant time studying how stock prices shift and what influences cause them to shift.
So you may be better suited to interday trading if you:
Have identified a certain profit you wish to make.
Enjoy research and analysis.
Have no hard-and-fast deadline you must "meet" and can be patient as you meet your profit goals.
As you contrast interday vs. intraday trading, it may help to remember that both are short-term trading strategies. And one is not better than the other; they're just different. Choosing the one for you depends on your financial goals, your circumstances, your tolerance for risk and (yes) maybe how many antacids you'll willing to consume in one day.