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What is Margin Trading? Margin Trading Kya Hota Hai? Simple Explanation in Hindi #TrueInvesting - YouTube
Channel: True Investing
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What is Leverage or Margin Trading in the stock market?
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How can we do Margin Trading?
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And is Margin Trading the right thing to do?
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Today we will know the answers to all these questions in this video.
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Hello friends,
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Welcome to our YouTube channel True Investing.
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trueinvesting.in is our blog
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which is based on investing.
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If you are interested in Investing, want to learn it,
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then do visit our blog.
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Let's move on to the first question.
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What is Leverage or Margin Trading?
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Friends, margin trading is a facility
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that every broker offers to its customers.
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With its help, we can buy more shares in less money.
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For example,
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if a broker gives a margin of 10 times on a share,
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then we can buy 10 shares
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at the price of one share from that broker.
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So friends if a broker is offering 10 times margin
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or leverage on SBI stock.
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And if the price of one share of SBI is 100 rupees.
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We can buy 10 shares of SBI
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instead of one share for 100 rupees.
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This means that
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we can buy SBI shares of 1000 rupees for 100 rupees.
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Friends, the thing to note is that
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most of the brokers offer margin or leverage only for intraday trading.
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And there are very few brokers
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who give us leverage for position or swing trading.
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And friends, no broker gives leverage for long term investing.
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As well as friends,
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The margin varies on each stock.
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Generally, good and large companies have higher margins on their stock.
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Whereas, the margin on the shares of small companies is less.
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And to give or not to give margin on any stock
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or how many times of margin to give,
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every broker decides according to his own.
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So friends, you must confirm all the margins with your broker
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before doing margin trading.
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Friends, now the question is why do brokers do this?
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Why do brokers allow us to buy shares of 1000 rupees for 100 rupees?
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The simple answer is brokerage.
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Friends, Brokers take brokerage on every buy and sell order.
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And the brokerage is based on the total value of the stock bought or sold.
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If a broker has a commission of 1%
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and we buy a total of 100 rupees of stocks.
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So that broker will charge us 1% of 100 rupees
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i.e. 1 rupee brokerage.
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But when we buy shares of 1000 rupees for 100 rupees
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with a margin of 10 times.
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Now the brokerage will be 1% of the total buy value i.e. 1000 Rs,
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which means 10 rupees.
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This is the reason why brokers provide margin or leverage.
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So that we buy and sell stocks of higher value
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and the brokers can take more brokerage from us.
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Now let's go to the second question.
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How can we do margin trading?
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Friends, for margin trading, first of all, we need a trading account.
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If you do not know about trading account,
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we have made a video on both trading and demat account.
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You must watch them.
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After creating a trading account, we will have to add money to that account.
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And then we'll have to check the margin of any stock or derivatives
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in which we want to do margin trading.
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And then we can do intraday trading
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according to the margin of that stock.
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Keep in mind guys,
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before you do margin trading, check the margin well from your brokers.
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Now we have come to our last question.
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Is Margin Trading the right thing to do?
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Friends, trading with margin is like a double-edged sword.
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We can earn a big profit from margin trading
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by putting very little money in a very short period of time.
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But if our trade goes wrong
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then we can also suffer big loss.
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Let us understand this with an example.
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Suppose we have 1 lakh rupees.
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And we want to do intraday margin trading.
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We chose a stock XY
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whose share price is 1000 rupees.
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And on this stock, we are getting 10 times margin from our broker.
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So friends, if we had not received the margin,
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we would have been able to buy only 100 shares of XY Company for 1 lakh.
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But because we are getting 10 times margin on the stock of XY company.
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So now we buy 1000 shares of XY company from the same 1 lakh rupees in intraday.
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Now friends, what will happen if the share price of XY
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increases by 10% in a few hours from 1000 to 1100 rupees?
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Friends, because we have bought shares worth 10 lakhs rupees.
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Therefore, the value of our shares will also increase by 10%
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from 10 lakhs to 11 lakhs rupees.
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And if we sell all our shares at the price of 1100,
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then we will get a profit of 1 lakh rupees.
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Yes friends, by doing margin trading with Rs 1 lakh,
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we can double our money by earning 100% profit on our investment in a few hours.
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But friends, if the share price of XY company
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decreases by 10% instead of increasing by 10%,
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then we will lose 1 lakh rupees instead of making a profit of 1 lakh rupees.
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And we will suffer a 100% loss on our investment
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instead of making 100% profit.
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So friends, margin trading in itself is neither good nor bad.
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It depends on us how we trade using margin.
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if we carefully and thoughtfully use margin without greed,
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then margin trading can be very good for us.
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But if we will trade with margin without doing technical analysis
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and being influenced by greed then margin trading can be harmful to us.
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So guys, this was our today's video on margin trading.
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In this, we learned what is leverage or margin trading?
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How can we do margin trading?
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And is it right to do margin trading?
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If you liked this video then please press the like button.
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And if you have any question related to this video,
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then write it in the comment box below.
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Thank you, friends. See you now in the next video.
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Take care.
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