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What Is Margin Trading & Is It Right for You?

What Is Margin Trading?

As per its definition in the stock market, margin trading is the process where individual financial investors purchase a greater number of stocks than they can afford. Margin trading additionally refers to intraday trading in India and different stockbrokers offer this support. It also includes purchasing and selling of securities in a single meeting. 

Over time, different businesses have relaxed the time span, as the process requires an investor to check or guess the stock development in a specific meeting. Margin trading is a simple method of making a quick buck, and with the introduction of electronic stock trades, the once particular field is presently open to even smaller merchants.

A margin account gives you the resources needed to purchase a larger number of stocks than you can afford. For this reason, the agent would loan the cash to purchase shares and keep them as guarantee. 

When the amount is open, you are required to pay an initial margin (IM), which is a sure level of the total traded value pre-controlled by the broker. Before you trade, you need to remember three significant steps. You also need to keep up the minimum margin (MM) through the session, because on an exceptionally unstable day, the stock price can fall over.

Eligibility for Margin Trading

You need to have a margin account with the broker to benefit the margin trading facility (MTF). The margin differs across brokers. You are required to pay a specific sum (least) at the time of opening the MTF account, while keeping a consistent minimum balance. 

Features of Margin Trading

  • Margin trading permits investors to use positions in securities that are not from the portion of derivatives. 
  • Approved brokers can offer margin trading accounts according to SEBI guidelines. 
  • Securities that are margin exchanged are pre-characterized by SEBI and individual stock trades. 
  • Investors can make positions against the margin as money or insurance through shares. 

Benefits of Margin Trading

  • Margin trading is available for those investors looking at encasing on the price fluctuations over a present moment, yet don’t have sufficient money on hand. 
  • Securities in the portfolio or de mat account have security/guarantee. 
  • MTF improves the rate of profit for the capital contributed. 
  • MTF upgrades investors’ buying power. 
  • The market watchdog SEBI and stock trades continuously screen the margin exchange office.

Is Margin Trading Right for You?

Margin trading will give you a higher profit than trading traditionally. Purchasing any stock on margin will amplify the effect of loss. It is not compulsory to margin at 50%, wherein you can margin less at 20% or 30%. You can also keep your loan for as long as you want if you fulfil all the required conditions.

There are many margin trading companies all over the region, with ADCB Securities being among the most prominent. ADCB Securities’ brokerage services help you achieve your goals by making your trading easy and secure, while providing you with all the products you need to empower your trading.

Why Choose ADCB Securities?

Here are the reasons why you should consider ACDB Securities:

  • They provide end-to-end services, which make it easier to find market complexities and build wealth making opportunities.
  • By choosing ADCB, you get integrated access to trade in local exchanges in the UAE.
  • You can link your bank account and trading account, making trading easier and hassle-free.
  • The world class team of ADCB experts will help you make smarter trading decisions.

Features of ADCB Securities

ADCB Securities provides the following features:

  • 0 AED minimum balance.
  • 0.275% commission and trade value.
  • 7% interest per annum on utilised margin.
  • 0 AED daily research report.
  • 0 AED fees for e-statement.

Required Documents

Whenever you apply for margin trading, you will be asked to show the following documents:

  • An original passport.
  • An investor numbers.
  • An original Emirates ID.

Risk Statement

A customer may incur losses from margin trading since it allows a single client to buy securities up to twice the amount deposited or the available balance in their margin trading account. Therefore, the client must be fully aware of the risks and principles applied in margin trading. In addition, the client must be aware of all applicable terms and conditions.