How does Margin Trading elevate your trading game?

Trading in the stock market is an excellent way to obtain high returns over a short period. It helps you diversify your portfolio and effectively take advantage of the growing economy. But sometimes, the most promising stocks may be out of your investment budget. In such cases, enjoying these benefits becomes challenging. This is when Margin Trading Facility (MTF) comes to your aid.

MTF is a trading provision allowing you to purchase stocks against limited capital. It lets you buy stocks by paying a marginal amount of the actual value while the balance is financed or funded by the broker. This way, MTF assists you in leveraging positions in the market strategically. Here are other ways in which MTF aces your trading game:

Cash delivery position

Through Margin Trading, you can carry forward an equity cash delivery position by maintaining a sufficient margin. This margin could be in the form of cash or stocks. So, you are not forced to close your position intraday or at a loss due to a lack of funding. 

Maximises potential

Online trading is quite lucrative in the long run. But it needs consistent investment, which is not always feasible. With MTF, you maximise your potential returns due to greater leverage.

Security or collateral facility

This facility allows you to utilise the securities in your portfolio or Demat Account as collateral. That way, you need not worry about arranging for cash margins.

Increases trading opportunities

Trading on margin increases your buying power considerably. It empowers you to take on more trading opportunities, helping you garner better returns.

Offers reliability

The regulator and different exchanges prudently regulate MTF. Hence, it is a reliable means of trading that ensures your security.

Facilitates short-term profit generation

MTF is also beneficial for those seeking profits through short-term price fluctuations. It facilitates their profit generation effectively by providing the necessary financial assistance.

Offers a longer holding period

Through delivery margin, you enjoy longer holding periods. That too, with minimum margin requirements. For instance, say you decide to buy stocks worth Rs. 20,000. Now, the broker will fund 80% of this amount, i.e., Rs. 16,000. The remaining 20% will have to be self-funded. But with MTF, despite the limited capital, you enjoy an unlimited holding period.

Quick tips to consider before availing of Margin Trading

Invest only if you feel the stock of your choice has high market potential.Check the subscription fees and other costs your broker charges for the Margin Trading facility.Look for brokers which offer MTF at low-interest rates as interest payable on the funding value invariably affects your profit and break-even point.