Delivery based trading is the most common form share trading done by most of the stock market investors throughout the world. In this type of trading the investors have to pay the full price of the stock and the stocks are deposited in their demat account. There is no predefined time limit in case of the delivery based trading for selling the stocks. Like all other forms of stock trading delivery based trading also comes with its pros cons.
Advantages of delivery based trading
The biggest advantage of delivery based trading is that you are not bound with time for selling the stock. You can hold the stocks for as long as you want. So, you can always hold a stock until you are getting a significant profit from the investment. Therefore, with delivery based trading you can always take your time to take a decision and reduce the risk of losses.
When you are making a long term investment with delivery based trading, you can also benefit from other things like dividends, split of stocks, bonus shares and so on. These are benefits that the companies offer to their share holders from time to time and you can make significant profit from these offers if you are holding the stocks for long periods.
Disadvantages of deliver based trading
The biggest disadvantage of delivery based trading is the higher brokerage rate. The brokerage rate for delivery based trading is relatively higher than the margin trading.
You have to pay the full price of the stock for deliver based trading, whereas, in case of margin trading you can buy stocks by paying only a part of the stock price. So, in case of margin trading you can buy more stocks by investing less.
In delivery based trading you can never benefit from short selling. That means you have to hold the shares before you actually sell them.
These are the benefits and disadvantages of delivery based trading. Whether you invest through delivery based trading or not solely depends on your financial capacity and willingness to take risks.