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What is meant by delivery trading and brokerage?

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Delivery trading is a secure form trading in which a trader either buy or sell share but does not square off the position same day. Transactions like these are settled as per T+2 settlement cycle of the exchange.The shares which you bought will reflect in your demat account. It is most common type of share trading preferred by stock market investors and traders.Once you have taken the delivery of shares you can hold them as long as you want. Their is no limit for that.But for taking delivery sufficient fund must be present in account as no margin is provided here to buy shares.
Delivery brokerage also known as equity delivery brokerage is the brokerage which is charged on a delivery trade that has to be settled in T+2 settlement cycles. Usually brokers charge different brokerage for intraday and delivery trades where intraday brokerage is less than delivery brokerage. The reason behind it is that risk in delivery trade is high and margin obligations remain blocked for T+2 days.
Advantages of delivery trading
  • There is no time limit here for selling of stocks. Traders can hold shares as long as they want to and wait for getting required profit.
  • Other benefits like dividends, split of stocks, bonus shares can be availed. These benefits companies offers to its share holders time to time and by holding shares for longer duration you can get those benefits.
Disadvantages of delivery trading
  • Traders are required to pay full price of shares for taking the delivery of shares. As in case of margin trading only a portion of total amount is to be paid.Traders can buy more shares in less amount with margin trading but not with delivery trading.
  • Brokerage charged by brokers is high as risk involved with this types trading is relatively high.Services of discount broker can be helpful as they charge less brokerage then full service brokers.
  • There can no be short selling with delivery trading.You have to hold the share before you can sell them.
Some tips to earn good returns in delivery based trading
  • Try to buy shares of different companies from different sectors instead of investing entire sum of money on shares of single company.By doing so loss earned by stocks present in your portfolio which under performed will be compensated by those which outperforms.
  • Keep good patience with market fluctuations. Share prices keeps on fluctuating but do not panic with such fluctuations.
These are some important points related to delivery based trading. Whether a trader opt for delivery based trading or not it depends on factors like financial capability and willingness to take risk.
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