After a long break was wondering what topic should I pen down. Having done a thoughtful analysis I’m going to share my thoughts on Intraday vs long-term planning. Which one you should use as an investor and which terms are synonymous with these trading styles while you place an order on Zerodha. There are two ways of making money in the stock market trading or investing. Depending upon the time frame and goals, you can either invest for the long term or trade daily. However, both these trading styles have different approaches to the stock market.
Intraday vs Long Term Investing in Stock Market
Intraday trading refers to the buying and selling of securities within the same day. In Intraday trading, you need to square off all your positions before the end of the trading hours on the same. Therefore, you cannot undertake the delivery of the shares when you deal in intraday trading. You can book substantial profits with the lesser amounts and can enjoy the benefits of margins over a shorter period. At times, it can be a risky proposition as you stand out to lose a lot of money if you didn’t time the movement correctly or at the right time. To be an intraday trader, you need to have sound knowledge of market movement and good knowledge of technical analysis. As a trader, you’re going to make profits from stock volatility so you should know how to exploit the price movement.
On the other hand, long-term investment means you’re investing in the stock market for a longer period to build wealth. It is more like creating a curated and balanced portfolio to make meaningful gains only when you remain committed for the long haul. The returns you make over some time are substantial due to the compounding factor. Thereby, reducing the fluctuation in price. For long-term investment, you need to pick those stocks that meet your financial goal strategy. Thus, you can grow with them in present and reap the benefits in the future. Always look for high-potential stocks with good management in hand.
CNC vs MIS in Zerodha
As we know what is Intraday and Long term Investments from the Stock market’s perspective. Now let’s check out how these two strategies are deployed in the Zerodha Platform.
From Zerodha’s end, they offer CNC and MIS as product types to their investors/traders. While placing an order, customers can choose CNC and MIS so that broker can execute the order accordingly.
CNC means Cash and Carry. This is synonymous with long-term investing from a brokerage point of view. As an investor, you’re going to hold the security overnight or more than that as per your wish. In short, you have cash and are willing to take the delivery of the security. Under CNC product type, your positions will not be auto-squared off before the end of the trading day. Neither you will be able to take any short positions. However, you can sell the stocks anytime from your holdings.
Whereas MIS stands for Margin Intraday Square off. You can use this product type to leverage margins offered by brokers. However, all the open positions will get automatically squared off if not closed before the auto square timing. Therefore, if you’re looking to book the profits from short-term fluctuation, ensure you choose MIS while placing an order on Zerodha.
Hence, depending upon on risk profile and the time you can commit to stock market you can choose CNC or MIS while placing an order. However, its advisable if you’re investing with long term objective then choose CNC or else choose MIS if you’re a trader.
Intraday trading and long-term investing are both tried and true ways to profit from the stock market. Your criteria, financial goals, investment horizon, and risk profile will all influence whether you invest long-term or intraday. In addition, the diversification of your money among various assets should be based on your financial objectives.