In this article, we will disucss
- Leveraging Market Opportunities: Tactical Approaches with Margin Funds
- What is a Margin Trading Fund?
- How Does Margin Trading Fund Work?
- How Does Margin Fund Investing Work? - An Example`
- Frequently Asked Questions
Leveraging Market Opportunities: Tactical Approaches with Margin FundsIf you have ever had to miss out on a trading opportunity due to shortage of funds, then margin trading funds can be the answer to your problem. It gives you an opportunity to buy stocks that you could not afford otherwise. While it may sound like a great opportunity, it is also a risky venture. Hence, it must be used carefully. In this blog, we have covered all the basics of margin trading so that you can use it to leverage good market opportunities as a trader.
What is a Margin Trading Fund?Margin trading is essentially a loan facility that you receive from your stock broker. The additional money allows you to buy shares over what your own capital wouldn’t. Since it is a leverage provided by your broker, it comes with a predetermined rate of interest that you must pay to your broker. Margin trading fund is also known as a leverage fund that investors can use to amplify their gains. However, if your trade goes wrong, it would also amplify your losses.
How Does Margin Trading Fund Work?Before anything, you will first need to have a Demat account with the broker, and you need to subscribe to the feature.
- Every broker has an initial margin requirement specified in percentage. It is the minimum amount you will have to invest to be able to use the margin trading fund.
- You must also remember that if your trade position is open and the prices are falling, your broker shall make a margin call when they feel the price of the security is going below the minimum margin.
- If you fail to meet the minimum margin requirement in time, the broker has the right to sell the securities in order to keep their fund safe.