Margin is the darkest element that traps retail investors. Everyone wants to make big money with the least possible amount and this leads to all the catastrophes of the market.
The margin is the worst possible instrument being offered to traders and it is because of the margin the catastrophe happens.
Fall in the market are always sharper than the rise and it is mainly because of the margin call at the key pivot levels. I always avoided margins and if I have to point at only one reason of my success in the market, it has to be because I avoided margin.
I did explore futures, options, derivatives when I was new but slowly when I knew about it, I avoided them. As of today I even don’t have futures or options enabled in any of my active accounts and the reason being they offer leverage. Your position in the market is always bigger than the amount you have in your account which is a reason for catastrophe.
The only time I use the margin is maybe when I expect the payment to hit my bank account in a day or two or NEFT is expected to hit my bank account at the end of the day and after market hours or cheque isn’t cleared yet.
Unless I am able to make the payment in t+2, I don’t use margin to trade or invest.
Now without much ado about margin, here is what Intraday margin is:
In the screenshot above, you can see the limit for my account is ₹226.39. I have shares in my DP from my open portfolio. If I move all the 45 units of Britannia from my DP into the margin.
The limit increases to ₹1,40,588.59 and the DP balance of Britannia moves over to Margin balance.
- The increase in trading limit is instant and within few minutes of moving stock from DP to margin.
- The total value of shares moved from DP to margin is much less than the margin amount I received for day trading.
There is a button for moving stock from Margin to DP.
Again the process is real time and the trading limit will decrease as soon as I make the move from margin to DP.
The amount of margin received for moving shares from DP to margin can vary from stock to stock.
If I move Pidilite from DP to margin, my intraday margin limit becomes ₹6,58,466.39 whereas the total value of shares moved from DP to margin is much higher than that.
The best way to know the margin limit for a stock is to put the stock into margin and see for yourself.
Note that even if your shares are in the margin, you will continue to receive the dividends, bonus, splits and other such corporate action on the stocks. If you prefer to apply for the rights issue, you may need to move the stock out of the margin into your DP.
The benefits are of ShareKhan and I am not sure if they vary from broker to broker. It is always better to ask your broker of what benefits you may or may not receive when you have the shares under margin.
To add more to the catastrophe, of adding limit with from your holding, some stocks allow you to take intraday trading position few times the account limit as well.
I sent you an email about margins and thanks for clarifying with all the details about margin. Shabbir you rock