what is Margin Trading

friends pls tell me about the margin trading, what is the advantage of doing margin trading. Doing margin trading is a risky business ?

Hi,

There are both advantages as well as disadvantages in doing margin trading. It is more like a double edged sword, if not used properly can cut both ways.

Simply speaking, If you have Rs. 10K and your broker is providing 10 times margin for intraday trading, then you can buy or sell shares worth 1 lac.

Now, if you loss by 1%, then you will lose 1% of 1lac, that is, Rs. 1000. However, your actual loss is 10% + brokerage + other charges.

Similarly, if you gain by 1%, then your actual gain will be 10% - brokerage - other charges.

If you have not used margin and traded with the amount you have, then your loss or profit would have reduced by 10 times, that is, around Rs. 100.

If margin is used properly along with the Money management, then it can be useful. However, it is advisable, initially when you start trading you should strictly use the money that you have.

I hope this helps.

About Margin Trading

I have this query on margin trading ;-

1. Whether broker will lend money to trader only for intra-day trading or we can avail the borrowing facility to hold the shares for a limited days like 7 to 10 days.

2. suppose if i have 2 Lac Rs of my own money , what is the maximum amount i can borrow from broker for trading ?

3.Among brokers like Reliance money, ICICI direct, sharekhan, Kotak securities, Geojit.... who is providing better terms of service on margin trading ?

Regards

Arun Kumar