In the stock market, margin trading is alluded as a process that allows the individual investors to purchase more stocks than their economical capabilities. Margin trading also talks about intraday trading in India and several other stock brokers offer this service.
Margin trading includes purchasing and selling of securities in one single session. Gradually, several popular brokerages have minimized the approach on time duration. The process needs an investor to anticipate or calculate the stock activities in a specific session.
Margin trading is a simple and swiftest way of making a fast buck. With the arrival of electronic stock exchanges, the once specialized space is now available to even small scale traders.
Till last year, the margin trading was accessible with cash and offering shares as gage was not welcomed. Recently, the Securities and Exchange Board of India (SEBI) flushed this statute by allowing investors to make their positions below the margin trading by providing shares as security.
Eligibility for Margin Trading
If you are interested in margin trading and wishing to be a part of it, you should have a margin account with the broker to get the margin trading facility (MTF). The margin is different from broker to broker.
For this you need a certain amount(minimum) at the time of opening the MTF account. You need to maintain a minimum balance all the time.
It may be any situation if your balance is less than the minimum required balance, then your trade gets squared-off. The squaring-off position is mandatory at the end of each trade session.
Benefits of Margin Trading
- Margin trading is perfect for those investors who wait eagerly to encash the price ups and downs over a short-term but with limited cash in hand.
- Security features present in the portfolio or demat account can be used as a security/collateral.
- MTF enhances the rate of return on the capital invested.
- MTF improves investors’ purchasing power.