Margin trading definition and mechanism


Margin trading definition and mechanism


Practice of buying stock with money borrowed from the broker. In this arrangement, the investor makes a cash down payment (called the margin) with the broker and can purchase stocks worth about twice the cash amount. Also, the investor has to put up additional cash in case the value of the stockholding falls below a certain amount. Margin trading is a double-edged sword - it cuts both ways. If the stock price rises, the investor makes twice as much profit as with his own cash only.

Similarly, if the stock price falls, the investor loses twice the amount. The BasicsBuying on margin is borrowing money from a broker to purchase stock. You can think of it as a loan from your brokerage. To trade on margin, you need a margin account. This is different from a regular cash account, in which you trade using the money in the account. By law, your broker is required to obtain your signature to open a margin account. The margin account may be part of your standard This article needs attention from an expert on the subject.

Please add a reason or a talk parameter to this template to explain the issue with the article. Consider associating this request with a WikiProject. (April 2012)In finance, margin is collateral that the holder of a financial instrument has to deposit with a counterparty (most often their broker or an exchange) to cover some or all of the credit risk the holder poses for the counterparty.

Forex margin trading is a trading with borrowed funds. This pledge is called margin. Margin funds are measured by the currency of deposit (for instance, US dollar). Also called buying on margin. A method of buying shares that involves borrowing a part of the sum needed from the broker executing the transaction. The investor must deposit an initial amount of cash or securities (initial margin or margin requirement) into a margin account with the broker, and must thereafter maintain a minimum amount of cash or securities (margin) in the margin trading definition and mechanism as margin trading definition and mechanism (maintenance margin, minimum maintenance or maintenance requirement).

Remember that CFDs are a leveraged product and can result in the loss of your entire capital. Trading CFDs may not be suitable for you. Please ensure you fully understand the risks involved. Please consider our PDS, FSG, Risk Warning and our Terms and Conditions before using our services. You can download a PDS for more information. It is essentially a leveraging mechanism which enables investors to take exposure in the market over and above what is possible with their own resources.

SEBI has been prescribing eligibility conditions and procedural details for allowing the Margin Trading Facility from time to time.Corporate brokers with net worth of at least Rs.3 crore are eligible for providing Margin trading facility.




Margin trading definition and mechanism

Margin trading definition and mechanism


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