Here we will talk about how you can increase your profit. We will talk about how you can buy more stocks than your savings allow.Now it is obvious that you will have to buy more securities for more profit and for that, you will need more money. For this we follow the path of Margin Trading.
Before knowing about Margin Trading, you should know what is Margin. Margin is the amount of money lying in your Demat account. Your stock broker (zerodha, angel broking, upstox, etc.) shows you Margin used and Margin avaliable. Margin used means the amount of money you have used to buy stocks and Margin avaliable means the amount of money you have left to buy stocks. When you buy a stock, that much money is deducted from the avaliable margin and that margin starts to show in used. Now that you know about margin, then we can talk about Margin Trading.
✍ What is Margin Trading
✍ How much leverage you may get?
✍ How to Perform Margin Trading and How to get Margin from the Broker
✍ pdf to download
What is Margin – Trading?Friends, Margin Trading is like trading with borrowed money. This loan gives you your own stock - broker or brokerage firm. That is, when you go out of your limit from the margin given by your broker and trade in the stock-market, then that trading is called margin-trading.
Now you can also think that we can borrow from anywhere for trading, so what is special about it? Then in this answer you should know that
i.There is no interest on the money that Stock - Broker gives you as a margin.
ii.You do not have to give any kind of application to take this money, that is when you buy stock, then Stock - Broker fills your money. How can we do Margin trading and how much extra margin we can get, we will know all this in further detail.
Friends, we call Margin Trading also leverage trading? Friends leverage or margin trading can only be done in intraday trading. If you do not sell the purchased stock on the same day, then your trading software such as kite trading software of zerodha people will automatically square off that trade, ie the trade will exit. Yes, if you want to short-sell, you can do that in margin-trading as well. Naturally, a question must have come to your mind that if the stock-broker does not have any intrest in interest, then why does he pay us money? For this you need to know how Brokers make money. When you trade on their trading platform, that is, buy and sell stocks, the Broker also charges some Brokerage fees on that trade and this fee is different from different Brokers. So now you will be trading more than the money given to them, so their earning earned by the brokerage fee will also increase.
How much Margin or leverage can you get from your Broker?How much leverage you can get guys, it depends three things
- First, that which Broker you have
- Second, which stock company you want to buy
- And third, how much avaliable margin do you have in your demat account?
In the table below, the maximum possible margin rates of all the major Brokerage Company of India are given. You can see that Asthatrades give the highest margin where you can get margin up to 40x.
|Stock Broker||Margin (without BO & CO)|
|SAS Online||Upto 20X|
|5 Paisa||Upto 15X|
|Bonanza online||Upto 10X|
|Aditya Birla Money||Upto 15X|
|Nirmal Bang||Upto 10X|
|Trade Smart Online||Upto 20X|
For example: If we talk about Zerodha, then it gives 20X margin at most but it is only available on some good companies like ONGC, Havells. Then 3X, 1.5X, 15X etc. on the shares of some companies. Get it this way. If you want to know which company gives which margin Brokerage margin, then you can check by going on the links given below.
(iii) From the above 2 points you must have understood that in margin trading you can buy a lot more stocks than your limit but it is not that you should be allowed to trade ₹ 10 lakh on an avaliable Margin of ₹ 10,000. You can get margins of up to 10, 20, times on your money. If seen, this is also very much because if you suffer loss in this, then it will be out of your limit. So let us now talk about how you can take margin from Stock Broker and how you can do margin trading.
How to Perform Margin Trading and How to get Margin from the Broker?You must have come to know that margin trading is made only for intraday trading. So if you do not know intraday trading then you can read our articles about intraday trading stratergies & tricks. You need to find out about volatile stocks for intraday trading. Well, if you know about all this then we talk about margin trading. Friends, if you want a margin from your Broker, then you do not need to ask for nor need to inform them by any mail. All you have to do is go to your trading software and buy stocks from MIS ie intraday trading. When you buy a stock in intraday trading and then the value of those stocks is cut a small part of that value from your avaliable margin and the rest of the money is paid by the stock broker. Now let us tell you how much this small part should be.
Suppose you have to buy 1 share of the company which is worth ₹ 100 and your stock broker gives 10x Margin on the stocks of that company. So in this farming, you will take one-tenth of 100 rupees, ie 100/10 = 10 rupees and the remaining ₹ 90 will be filled by yourself. Here you can see that when you started with 10 rupees, you could trade 10 times, that is, 100 rupees. If this stock would have been Broker Zerodha and you would have got 12.5x, then you had to fill 100 / 12.5 = 8 rupees.
And when you sell those shares, then you get the money that you had invested and the profit made and you take back the money that is put on behalf of Stock Broker. But remember, the stock market is a two-edged sword, if there is an advantage in the stock market then it also has losses. If you have any loss in Stock Market then that money is also Stock Broker will deduct from your own money.
In this way, the Stock Broker will neither ask for a share of your profit nor suffer any loss. Another question arises that what will happen if you turn into loss and your loss becomes more than your own money?
(This possibility may arise because if you have 100 rupees, then you can apply for the margin of 2000 rupees, and 2000 rupees trade can easily loose 100 rupees ) . When your loss gets closer to your real margin, then your trading software automatically exits your trade. As your loss continues, more money starts to show in your used margin. If this loss turns into your profit, then this money starts showing again in your margin avaliable.
If your avaliable margin is exhausted then the Broker will sell your stocks themselves and if you have any remaining money will be returned to you. If you do not want Broker to sell your money yourself, then you do not have to let your avaliable margin end. And if it starts to end, then you have to put more money in your demat account.