When you buy the share and not selling the share on the same day. This means you are taking delivery of share. Delivery Trading.
For example, if one trader buys a stock Monday and not selling the stock money. This means the trader is taking delivery of the buying share.
When comes to investing in the stocks this means the trader is taking delivery of the stocks. And can sell anytime when they want. Long term Investing means they will hold the stock for a long time.
To take delivery of the share then you have to click the Delivery or CNC option in your trading software. that means you are holding the stock.
What is delivery based trading?
Delivery trading means when traders buy the stock for trading purpose but the trader is not buying and selling on the same day. This is delivery based trading.
For example, one trader buys stock Wednesday day and selling the stock the next day or below 1 year. This means the trader is doing delivery base trading.
Delivery trading Pros
- Doing delivery trading is low-risk trading. If you are doing Intraday trading then you have to buy and sell the stock same day even if you are in the loss but in delivery Trading, if you are in a loss on this day you hold the stock for the next day. And when the stock price started rising then you can sell the stock and make a profit. This is a very good way of trading.
Cons
- You will not get margin or leverage from the stick broker. Margin money means if you have $10 and the broker provides 10 times the margin. So that you can buy worth of $100 stock, this margin money broker provides for Intraday trading. If you are doing delivery base trading or taking delivery then you will not get margin money from the broker.
- When you are taking delivery the stock then you have to pay DP charges for holding stocks.
- Taking delivery means after closing the market if any news comes to market that can impact your investment.
Delivery Trading Tips
Before delivery, you can read the below point. so that you always be in the profit.
1. Fundamental Research
While Doing delivery trading investors should have checked the fundamentals of the stock. so that if the stock price falls a little bit still you can hold and sell when the share price will rise.
For example, you brought a stock at the price of $200 then stock price fall to $195 level. So in this situation you can hold your stock but when share price is moving down and holding stock isn’t a good option because more falling means more loss. But if you have done fundamental research before investing in the stock then you can hold the stock. A good company’s stock can fall in short term but in a longer time period you will be in profit. That why you should do fundamental research before investing to the stock.
2. Money management
While investing or trading you should have learned money management. Because without money management end of the day you will be in profit.
3. Stop Loss
You should not forget your Stop loss limit. when the share price is falling then you have to decide what is the maximum risk you can take. so that after a falling price to that level, you should exit from the stock.
4. The risk to reward Ratio
investing in the share market you have to follow this risk to reward rules. The risk to reward Ratio means, if you are putting 1% as a Stop loss then try to set a target above 2%. so that you will be in profit.
Imagine you have take 2trade and one is wrong and one is correct. still, you will be in profit using risk to reward ratio.
Conclusion
Delivery means when you are buying and not selling the stock, this is the delivery in the stock market. means you are taking delivery of the stock. this is generally for investment purposes. but some traders buy the stock today and sell tomorrow or very frequently, this is called delivery based trading or delivery trading.