SHARETIPSINFO >> Articles Directory >>Margin buying- profitable way of doing online trading in stock market India
Margin buying or margin trading or daily trading is a profitable way of doing stock market investment. In case of margin buying stocks are bought by borrowing money where the stock itself acts as the collateral. Now this is the technical aspect of margin buying that might seem to be a complex process. But in reality there is nothing complicated about margin buying. In margin buying the investors buy the stock by paying just a small portion of the total price of the stocks and these stocks are to be sold on that very day within the specific trading time at that exchange. Here we are discussing different aspects of the margin buying along with the advantages and disadvantages of margin buying.
In case of margin buying an investor can buy number of stocks by paying only 10% to 20% of the total value of the stocks as per the current market price of that stock. But in margin trading it is important that you have to sell the stock on that day itself. In most cases the investors set a fixed rate of the stock and the stocks get sold automatically when the stock reaches that amount. If the stock does not reach the speculated price then you can sell the stocks at the available price. In most cases if the stocks do not get sold at the end of the day for any reason, it will be sold at a price that is available at the time of closing the market.
So it is quite understandable that margin trading requires comprehensive and confirm information regarding the stock on which you are investing. Moreover, you need to keep constant vigil on the movement of that stock once you have invested in it. As these stocks are fast moving and show different trend during a trading day, hence you have to cautious while trading in margin. So it is advisable that you should opt for margin buying only when you access to real time stock prices and take decisions immediately.
Apart from the fact that you can deal in more stocks without investing total amount of the price of the stock, the brokerage for online trading is lower than delivery based trading. So you have less burden when it comes to selling the stock. You need not have to wait till the stock rises to the level where you can get profit after deducting the huge brokerage that happens when you are doing delivery based trading.
Among all these good things margin buying does have its demerits. The biggest drawback of the margin buying is of course the time frame in which you have to close the deal. The span of every margin buying is trading day or simple a few hours. Often times it is seen that the stock do not get enough time to appreciate or it does not get time for corrections after the price had fallen for some reason within that day. So it is evident that margin buying risk is greater than delivery based trading where you are getting unlimited time recover from the loss.
So it can be seen that like many things margin trading as well has its positive as well as negative aspects. While you can earn more with margin trading there is more risk associated with this type of trading. But with proper investment strategy and continuous vigil on the stock movements you cab effectively reduce the risk of margin buying. You have to select the right stocks for margin trading and most importantly invest at the right time when the price of the stock is within the favorable range for investment. It is always advisable that you should opt for margin trading only if you have comprehensive knowledge of the stock market and have access to the details and real time stock prices throughout the day. So there is no doubt about the fact that only experienced investors can gain from margin trading as they have the knowledge of the market.
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