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May 16, 2015

How to make big money through Margin/Max/IntraDay trading ?

  5/16/2015 No comments

 What is Margin or Max Trading in equity market?

Well margin trading is one such facility allowed by Company
to stock traders to buy and sell one equity shares at 1/10th of actual price of the share for same day during trading hours.
Stocks buy and short sell has to be cover before market closing time specified by the stock exchange.

There are many large companies that allow Margin Trading
to their script whereas there are so many small and mid-cap company that do not allow Max/margin trading.

Let us understand what is Margin trading through an example :
Before we start how can we do margin trading, lets first see how can we find whether any company allow margin trading or not .
In below given picture it is highlighted that a Company called TCS(Script code-TCS) allows
"Margin Trading  :Y(yes) " and "Intraday Margin :10.00%".
This means that we can buy/sell equity shares of TCS at price 10% of actual price in intraday trading.Consider that actual price of share is $100 then we can buy 1 share at $10.

1.IntraDay trading using BuyMargin and make big money :

Let us assume that I am having $1000 and I want to do intraday trading in TCS share.
I can buy 100 equity shares of TCS at price $10
So buy price = 100*10 =>$1000
But the actual price of 100 shares =100*100 => $10,000
Now the question is how can we make big money out of just $1000 ??

Let assume that due to very good quarterly result of TCS share price gone up by 5% and I had bought 100 share so price is now at $105.
So the current price of 100 share is = 100*105=>$10,500
Now if I sell the 100 share at $105 before market closing hours, then total selling price
                                                  =$10,500

So profit booked in intrday trading = $10,500-$10,000
                                                   = $500

Now we can see that total profit made is 50% of my money.Thus we can make quick money in intraday trading.
But Intrady or Magin trading is high risk high reward trading techniques that basically done by expert traders who has knowledge of price fluctuation of any company share .

Why is it highly risky and dangerous?

Let us assume that price of TCS gone down by 5% on the same day due to poor result then similarly :
Current price of TCS is now $95
so selling price=100*95 => $9500

So the loss booked for the day = > $10,000- $9500 => $500
Thus total loss is 50% of my total money.

2.IntraDay trading using SellMargin and make huge amount of money :

We have seen that by buying of share using BuyMargin,we can make money vice versa as well in Margin trading.Short sell is that technique.

What is Short Sell in margin trading?

Selling the equity shares of company that we actually do not have and covering(buying) it back before market gets closed.

Demonstration of short sell :

Let us assume that I am having $1000 and I want to make money through Short sell just because
market is falling due to certain economy crisis and I think that price of TCS share shall go down as well.

So I sold 100 share of TCS at $ 1000 using SellMargin option through broker website.
So selling  price = > $10,000
After one hour of trading I notice that price of TCS gone down by 6% then I decided to buy back the share which I sold at $100.

So buy back price=>100*94 => $9400

So booked profit for the day in ShortSell margin trading => $10,000-$9400
                                                                                 =>$600
Therefore we see that 60% profit  booked of my money invested in just single day itself through Margin trading.

Suggestion :

Margin trading should not be done by beginners in share market as it is very risky and dangerous .



Author: Vikas Pandey

He is a software and web developer working for renowned European investment bank.He loves to share knowledge through blogging whatever he knows and encourages others as well to share the same to make world a better place to live.

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