What is Margin Money Trading?

Indian stock market opens its doors to make money every day and now concept of margin money trading has brought all at same level i.e. whether one is a retail investor with small capital or a high net worth individual (HNI). This is the reason we call it as the Eighth wonder of the world.

Margin Money Trading Concept

Margin money is the facility extended by your broker against your cash held or shares held with him. Normally to buy and sell shares, you need to have the money to pay for your purchase or have shares to deliver in case of a short selling of stocks. However as you do not have the full amount to make good for your purchases or shares to deliver for your sale you have to cover (square) your purchase/sale transaction by a sale/purchase transaction before the close of the day. Thus when you are undertaking the intra day trading, the trade is closed before the end of the day and profit or loss if any is debited to your account by your broker. The amount of margin being extended to you varies from each broker.

Please understand the margin trading with following points

• In case the price during the course of the day moves in your favor (risen in case of purchase done earlier and fallen in case of a sale done earlier) you will make a profit and you receive the payment from the broker.
• In case the price movement is adverse, you will make a loss and you will have to make the payment to the broker or he will adjust the amount from your account.

Margin trading can yield a huge profit if executed correctly. However it is always advised that margin trading be undertaken with financial discipline and one must keep the greed factor under control as margin trading amplifies your gains and losses to the same degree.