Why is Intraday Trading not the right method of investment?(Disadvantages of Intraday Trading)

Why is Intraday Trading not the right method of investment?

The bitter truth of Intraday Trading

You must have known about the great investor Warren Buffet, who is considered to be the God of the share market.  In 1996, while discussing the investment portfolio of his company Berkshire Hathway, he said - "Our portfolio shows little change: We continue to make more money when snoring than when active."

  

 

That is, long term investing has an important role to earn a good investment from the share market.  That is why the CEO of Berkshire Hathway said that any stock should be bought with the mindset that we can hold it happily for the whole life.  Warren Buffet prefers to invest in companies that are fundamentally strong and have the potential to deliver good returns in the long term.

But all the people interested in the share market have different ways of investing and their opinions.  Some people like to invest in long term, some prefer to invest for short term while some people also do intraday trading.

Why is Intraday Trading not the right method of investment?

Whenever a person enters the world of the stock market for the first time, he finds intraday trading a very good option, but the truth is different.  If you do not know, then you should know that when we buy the shares of a company and sell it back on the same day, it is known as intraday trading.  Stocks are held for a few minutes to a few hours.  However, some people hold it for only a few seconds and sell it back.  People do this to take advantage of rapid fluctuations in the market.  Conversely, if we hold the stakes for a few months to a few years, it is known as long-term investing.  In this strategy, we give more importance to long term returns and not to market conditions in short term.

     

Different people use different styles and different strategies according to their own.  If we talk about intraday trading then it is an active style because the investor earns money by taking advantage of short term fluctuations in the market.  Apart from this, in intraday trading you have to sit in front of the screen for a long time and keep an eye on the changes in the market and you have to create a system on which you can trade.

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By the way, this task can be quite challenging because the global market works in different time zones, so the timing of the market being open is different in every country.  For example, the Indian market and the European market open at different times and if a person wants to earn maximum profit in day trading, then he has to keep an eye on both the markets.  Conversely, if we talk about investing, you do not even need to sit in front of that screen after buying a stock and you can analyze your stocks monthly.

Apart from this, the biggest problem of intraday trading is that in this you have to pay many types of charges and fees.  There are too many transactions in a day and different types of charges are levied on these transactions like Transaction Charge, Brokerage, GST on Brokerage, Stamp Duty etc. and the sum of these comes in the form of a huge amount of money.

So even if a trader wants to be in a break-even situation, in reality he will have to earn some profit in the market because all these charges are also incurred.  Profits in intraday trading are placed under the category of Speculative Profit and this profit comes under the Income Head of Business and hence tax is also levied as per the general rules.  If we want to save tax, then we have to invest and after that tax will be taxed according to short term capital gain or long term capital gain.  Apart from this, in intraday trading you can also trade by taking margin, which has to be paid back by the broker.

You should keep in mind that intraday trading is very risky and a decision of yours can cause you a huge loss.  That's why many experts consider intraday trading a gamble.  Hence new investors are advised to stay away from intraday trading.

In intraday trading, decisions are taken according to technical analysis rather than fundamental analysis and there is a lot of spectulation in technical analysis which can be risky for you.  If you are not ready to take this kind of risk, then it would be better for you to give more importance to investing rather than intraday trading because the risk is less in it.  While doing long term investing, you can easily take your time and analyze companies and by purchasing them at the right price, you can make your investment journey more beautiful.

You will hear many such news that that trader earned such a huge profit in one day, but the truth behind that huge profit is that for that the trader has to put a huge amount of money at stake and also face huge losses.  May be required.  If you want to take training in a professional way, you will still have to spend a lot of money for this.  Apart from this, it is also very important that you invest money to teach it in the right place so that you can get full benefit because nowadays news of many types of fraud also comes in the market.

Whenever a person starts working in a share market for the first time, he does not have so much knowledge and skills and that is why many intraday traders lose their money and then a wrong image about the share market goes to the people.  Apart from this, a person has to be mentally prepared to earn profits and bear losses in intraday trading and Psychology plays an important role in it.

Keeping all these things in mind, we can say that intraday trading is not a good way to invest, but everything has some advantages and some disadvantages and this is also applicable.  If still someone wants to do intraday trading then it should work only after getting complete knowledge about it.  Nowadays, many means of obtaining knowledge are available.  Apart from this, you can also strengthen your skills by doing paper trading.

Whenever we buy shares of a company, we buy a small part in it and the share market is based on this concept but this rule is not followed in intraday trading because the stocks are sold after a few minutes or hours.  That is why even great investors like Warren Buffet do not speak in favor of intraday trading.

We hope that through this article you will have got to know a lot about intraday trading and you must have learned something new.

Thank you!!