According to the principles of margin trading, the client’s account balance acts as collateral for the line of credit issued by the broker. This credit enables the trader to capture larger positions and apply higher levels of financial leverage than initially possible. While everyone is subject to the same margin requirements regardless of their account balance, this credit enables anyone to use leverage.
INTRADAY MARGIN
What is Margin? how you can use in intraday trading
The term margin is used when you borrow funds from your broker and use them for buying stocks. You are required to pay back this amount plus interest at regular intervals. This means that if you buy shares worth Rs 1 lakh by borrowing Rs 50,000, then you will need to repay Rs 51,500 every month. Intraday margin helps investors to borrow funds from their brokers. Because of this trading, you can buy more shares very easily. Margin Buy/Sell is an exclusive product designed for our intraday traders who wish to buy and sell shares on margin. You can buy and sell shares and square off your positions on the same day. The lending is usually couched in technical jargon. It commonly takes three forms intraday trading, futures trading, and options trading.
INTRADAY TRADING
Intraday trading refers to buying and selling stocks on the same day before the market closes. If you fail to do so, your broker may square off your position, or convert it into a delivery trade. Intraday Trading is also known as day trading is the purchasing and selling of stocks within the same day. It is riskier than investing in the regular stock market. It is important, especially for beginners, to understand the basics of trading. Individuals are advised to invest only the amount they can afford to lose without facing financial difficulties.
Intraday describes the variability in how an asset changes from one point in time to another. In other words, it is a day-to-day fluctuation that can affect not only long-term investors that may be holding on to their assets for several years, but also short-term or day traders that execute a lot of trades in a single session
DAY TRADING ON MARGIN
Margin trading involves buying and selling of securities in one single session. Over time, various brokerages have relaxed the approach on time duration. Buying on margin increases a trader’s buying power, allowing them to buy for a higher amount than they have cash for; The shortfall is filled by the brokerage firm at interest. Day trading/intraday trades have their inherent risks as it is highly dependent on the movement of stock prices on any given day.
Intraday margin trading can give you a high profit but also at the same time, you can lose your amount. Most important, If you are an intraday trader so your account should maintain. because if your margin call will be issued and your account have no balance so you can lose your position, after maintenance you bring it back up to margin maintenance value.
Margin Requirements
when you buy a margin or want to get more profit, so, you should maintain your account, because it is also Increases your buying power: The margin trading process is very simple.There are some simple steps:——–
- First, open a margin account, a margin account is a separate trading account.
- Investors must deposit enough cash or eligible securities.
- The loan or the margin money which is borrowed from the broker comes at a cost i.e., the interest. Therefore, one should use a margin account for short-term trading as the interest on the margin money keeps accruing.
- You are required to maintain a minimum balance at all times. If you fail to maintain the minimum balance, then your trade gets squared off.
- You are supposed to pay a certain sum (minimum) at the time of opening the MTF account The squaring-off position is compulsory at the end of each trade session.
ADVANTAGES OR DISADVANTAGES OF MARGIN TRADING
ADVANTAGES:
- Allows use of financial leverage.
- Helps in making decisions about altering selling price to gain market share.
- margin rates may also be competitive with rates on home equity loans, without all the paperwork and application fees.
- Margin can magnify your losses just as dramatically as it can boost returns.
- Being able to invest more while having limited cash on hand allows you to take advantage of timely market opportunities.
DISADVANTAGES
- Interest expense of margin loan.
- The margin of safety, which turns out to be very high, may cause management to lead to inappropriate use of excess funds.
- You increase risk whenever you trade on margin. You could lose your initial investment, plus what you borrowed from the broker.
MARGIN RULES
SEBI’s new peak margin rules for traders to come into effect from September
The Securities and Exchange Board of India has notified its new rules on trading, which will be effective from September, That all brokerages have been asked to provide their data on how much commission or other fees they charge per trade.
The rules adopt the term “pattern day trader”, which includes any margin client who trades four or more times in five business days on that day, provided the number of day trades is equal to the client’s total trading activity for the same five. be more than six percent. day duration.
New Rule of Day trading on margin
1) The minimum amount required should be Rs 50,000 per trade. This includes both longs and shorts.
2) There must be a daily average turnover of Rs 1 crore.
3) An investor needs to have sufficient capital to cover his/her position. If he/she fails to do this then he/she will need to pay back all the borrowed money plus interest.
Margin Requirements by SEBI Margin Requirements by SEBI
What is day trading on margin ?
1) The minimum amount required should be Rs 50,000 per trade. This includes both longs and shorts.
2) There must be a daily average turnover of Rs 1 crore.
3) An investor needs to have sufficient capital to cover his/her position. If he/she fails to do this then he/she will need to pay back all the borrowed money plus interest.
