Have you gone through a situation where you had the opportunity to invest in profitable shares but couldn’t due to a shortage of money? If yes, then the best solution is opting for a margin trading facility that allows you to continue trading by providing a surplus amount during live trading.
So, let’s understand the meaning of margin trading for the traders, the benefits of margin trading and how intraday traders can use this facility to place an order even with no money in hand.
What Is Margin Trading For Intraday Traders?
Margin trading is the process of buying more stocks than investors can afford. This margin amount is borrowed from the broker’s fund, and one can use it for trading in large-size stocks.
Intraday trading consists of sustainable loss and gain in a very short period due to the fluctuation of the stock price on the same day. And the margin in day trading allows for enhancing the power of trading to buy a greater amount of shares and also permits short-selling. Such direct benefits facilitate the traders to mint money from the stock market.
Top 5 Reasons How Margin Trading Facility (MTF) Is Beneficial For Intraday Traders?
If you usually go out of money while investing in stocks, then here are some of the benefits you can get by opening a margin trading account.
- A margin trading facility is for those people who have the opportunity to invest in the short-term price moment but don’t have enough cash. By opening an MTF account, you can fill the gap and continue trading for the stocks you want.
- It helps to utilise your idle share in your Demat account by using them as collateral in the equity market.
- MTF also o improves the return percentage on the capital you have deployed in the stocks. This ROE is gained because of the allowance to trade only in the margin, where you need to pay just 25% of the cost. This means if the price goes up to 5%, your ROE gain will be only 20%, which is a profitable decision.
- MTF processes help to leverage position in securities even if the investor is not from the derivative sectors like futures, options, swaps, and forwards.
- The facility of margin trade is regulated by the Securities and Exchange Board of India (SEBI). SEBI is an Indian government body that comes under the ownership of the Ministry of Finance. This body is responsible for maintaining the securities and commodity market. So, you can trust the margin trading facility for intraday trading.
Bottom Line
Though investors can make a huge profit using a margin trading facility, there is also some risk involved that can put you in trouble. The traders can be at high risk when they start losing more than they have. If the minimum balance is not maintained, then there is a risk of liquidation, where brokers have all the rights to sell some part of the assets to recover their losses. So, it’s better to leverage the benefits with a smart mindset.
