What Is Margin In Intraday Trading?

By Author: george thomas
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Intraday trading, also known as day trading, is proven to be a great opportunity for investors to make quick money by correctly analysing the markets. Intraday margin is a fundamental feature of day trading that you must understand.

What is Margin Trading?

Margin trading is a method of putting a leveraged trade forward in the stock market. Simply put, it is a feature of intraday trading that allows you to buy more stocks than you can manage with your own money by taking loans from your stockbroker.

Intraday trading margin allows you to increase your returns by allowing you to take trading positions with a bigger portfolio value than you could have previously afforded with just your own money.

How Does Margin Trading Work?

You borrow money from your brokerage business to pay for part of the transaction price of securities when you buy securities on margin, and you agree to repay the loan over time. The amount you borrow is determined by the amount of margin in your account, which changes depending on the asset you're purchasing with borrowed funds.

The amount of margin you are permitted ...
... to use is determined by your broker and the instrument you desire to trade. If you want to trade stocks, for example, your broker may enable you to trade up to 30% of the whole value of a stock. You must then provide the remaining 70% of the stock's value from your own finances. Some forex brokers allow you to trade from 50% of an exchange rate with margin.

Important Terms in Margin Trading

It is critical to keep up with technical jargon while considering trading. This terminology may appear scary at first, but if you understand what they imply, it will only help you in your trading endeavours. Intraday margin is defined by the following terms:

Initial Margin: This is the percentage of the entire market value of the trade in which you are participating that you must pay in cash. This sum must be unlevered; that is, it cannot be borrowed. This pre-determined sum of the initial margin will be communicated to you by your broker.

Minimum margin: Your broker may provide you the option of using an intraday trading margin, but he or she will want to protect the money you borrow. When you seek to open a margin account with your broker, the minimum margin is the cash amount you must pay upfront. This money is locked and gives a safe amount to the broker, which he or she can reclaim if your trade loses money and they lose money.

Margin call: In the realm of intraday margin, a margin call is a warning call from your broker when your margin account falls below a specified threshold. It is a legal necessity to keep a particular amount in your margin account in order to execute leveraged trades. As an investor, you must respond to the margin call by either extra depositing funds or selling securities to bring the margin account value up to the needed level.

Intraday trading margin is a fascinating way to make trades. It should, however, be approached with caution. The requirements for maintaining different types of margins should be carefully read and followed.

When margin trading intraday, you must keep a set quantity of money in your account. A margin call will be issued if you do not maintain this amount within the same trading day. You'll be given the option of closing your positions or adding funds to your account to bring that back up to margin management value.

Maintenance Margin: This is the amount that you must keep in your margin accounts payable in order to trade intraday.

Bottom Line

Day trading on leverage empowers a trader to raise money from their broker in order to purchase more shares than they have in their account. Traders can also short sell their investments using intraday trading margins. One can increase their returns by leveraging the power of leverage.

You can start using margin in day trading through reputed and well-authorized broker InvestFW. It is known for providing world-class trading tools and a good environment for all kinds of traders.