Have you gone through a situation where you had the opportunity to invest in profitable shares, but you 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 you can afford by paying a marginal amount either in cash or pledging your shares. This margin amount is borrowed from the broker’s fund, and one can use them for trading in stocks.
Margin trading is a boon for intraday traders as they ride on market volatility and often need large funds to take up more trades.
Intraday also consists of unpredictable profits or gains in a short duration due to fluctuations in the stock price. As a result, the margin in intraday trading allows traders to do more trading and buy more shares with less amount of money.
Such direct benefits facilitate the traders to increase the chance of making money from the stock market.
What Are the Benefits of Margin Trading Facility?
Here are some of the benefits you can get by opting for a margin trading facility as an intraday trader.
Fulfilling the Capital Requirement
A margin trading facility is for those traders who want to trade in the short-term price moment but don’t have enough funds. By opening an MTF account, they can fill the gap and continue trading for the stocks they want.
Increased Trading Capital and Leverage
MTF helps to utilize your idle share in your Demat account by using them as collateral in the equity market. For example, you can use these shares to borrow some amount through which you can buy stocks worth more than your capital.
A trader generally gets 10x leverage on their collateral shares and 5x on the cash balance. This means trades can take on stocks they could not afford earlier. Margin trading allows traders to raise their trading capacity and take on lucrative trades.
Flexible Options to Return the Funds
Unlike other lines of credit, MTF provides more flexibility to you as an intraday trader. If your position is not negative and does not exceed your margin requirements, you can pay back the funds as per your schedule.
You need to sell the stocks you have or add cash to fulfill your margin requirement and free your investments.
What is the Bottom Line?
Hope this article helps you understand the nuances of margin trading. Through margin trading, you can take the benefit of trading with less capital, increase the leverage you can avail, and make the most of it to enhance your trading potential with ease.
Read More: How to Trade on Margin – Tips and Strategies