What is the buy average?

Buy average is calculated for the delivery trades. The calculation is based on the First In First Out (FIFO) method. It is calculated for the shares that were bought first and will be netted off against the sell trade. 

What is Intraday Trading?

Intraday trading refers to buying and selling financial securities within the same trading session. Any transaction without delivery in/out of demat account is an intraday transaction.

Day traders can trade as often as they want within a trading session. Depending on their trading strategy, they can place a trade for a few seconds, minutes, or hours. They need to close each of their positions before closing the market. In case a day trade has not closed the positions before the trading session ends, it will be squared off automatically. 

A demat account and trading account are the ma ndatory accounts for an individual looking for trading securities on the stock exchange. Day traders need a trading account primarily because they do not hold securities even for a night. Therefore, the demat account is not of their use to hold any security. 

Will the buy average be affected after selling shares from the holdings and buying them back the same day?

Intraday traders can buy or sell the shares at any time during the trading session. An intraday trade does not affect their ‘buy average’ calculation. 

  • The simple reason is that the shares don’t transfer from a demat account. When you sell shares from your existing portfolio and buy them back on the same day, there is no movement of shares in your demat account. 
  • All transactions without delivery in/out of demat accounts are intraday trades and considered speculative that are categorized separately as per income tax rules in India. Therefore, intraday trades are treated as separate transactions from delivery trades that are considered for capital gains. Intraday trades cannot be mixed with delivery trades. 

Thus, intraday trading do not affect your buy average in stock trading, Indian laws say. 

Suppose you bought company A 100 shares at Rs.500 a year ago. Today you placed a trade order and bought 100 shares at 1000 and sold them at Rs.1010. The average price will remain at 500 instead of 750 (buy an average of 500 and 1000) because an intraday trade shouldn’t affect the buy price of holdings. 

Is it risky to buy and sell a stock on the same day?

Traders should know that buying and selling a stock on the same day comes with huge risks because it is nearly impossible to predict the exact way a stock price will move over just a few moments. Therefore, most individuals favor long-term buy-and-hold investing. If you are beginning your trading career in the stock market, you need to know about the share market basics. Here are some of the basic strategies you should follow.

Share Trading Rules for Beginners

Risk control and money management are the essence of share trading. When individuals are involved in share trading, they cannot chase the returns only. Their priority should be saving their funds over returns. Let us discuss some thumb rules in share trading for beginners that will help you to trade in the stock market efficiently. 

  • Do not get confused about trading and investing strategies.
  • Manage your money by identifying the risk and reward for each and every trade. 
  • Traders can reduce the potential losses with a strict stop loss. 
  • Do not overtrade to average your trades. 
  • While picking stocks, a thorough analysis of the company is necessary. Verify on news and rumors. 
  • Never try to challenge the market.

These rules will help beginners in stock trading to stay long with reduced risks.

By Williumson

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