Part 7 -EA

Equity Margins

What is Margins ?

Before to know what is Margins ,lets understand we trade in equities in two formats

A. Intraday – What is Intraday – Buy & Sell Same Day

In other words, intraday trading means all positions are squared-off before the market closes and there is no change in ownership of shares as a result of the trades

Intraday is also known as Margin Intraday Square off ( MIS)

B. Delivery Trade – Buy today the shares gets credited T+2 Days

There’s only one difference between a regular trade and intraday trade. It lies in taking the delivery of the stocks.

In intraday trading, you square-off your positions the same day. So, your sell order offsets your buy order. This way, there is no transfer of ownership of shares. A regular trade ( Delivery trade) gets settled over a span of days means T+2 days. So, you get delivery of the shares you bought while the shares you sold move out of your demat account

WHO SHOULD PARTICIPATE IN INTRADAY TRADING?

Answer: Those who can take risks, and have enough time to follow the market closely and time trades.

Intraday trading promises high returns and thus may sound very attractive. But it also carries a higher risk compared to the delivery segment. So if you have a day job that requires your full attention for most of the trading hours, you may want to avoid intraday trading.

For one, you have to watch the market and time your trades to perfection. Secondly, you need a good understanding of and time to perform technical analysis on daily charts to make the right decisions

WHAT KIND OF STOCKS TO CHOOSE FOR INTRADAY TRADING

It is essential that you choose stocks that have enough liquidity ( More buyers & sellers available)for executing such trades. This is why many recommend high liquid stocks like large-cap stocks

WHY SHOULD YOU PARTICIPATE IN INTRADAY TRADING?

Some of the advantages of intraday trading are:

  1. Higher margins available to traders compared to investors
  2. High return potential

let’s Come to margin now

Each Stock broker gives different margins to their clients.

https://zerodha.com/open-account?c=AUOUSS

If we are doing intraday – with the above broker -they give the below margins

Margins varies stocks to stocks

https://zerodha.com/margin-calculator/Equity/

CNC means – Delivery trade – if you are doing Delivery trade ,you need to have entire capital and NO Margins are Provided

Cash and Carry – CNC- Delivery trade – One and the Same

Intraday – If it means 3x – If you have 1000 rupees ,broker gives 3 times margin ( 3 times means 3000) Ruppes

Thank You

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