Missing out a money-making proposition because of a lack of funds can be heartbreaking. However, with the MTF option, traders can now invest more than their purchasing power. Sounds too good to be true, right? Well, it is true!
Understanding MTF:
MTF stands for Margin Trading Facility. A few brokers in India offer this service. With this facility, your broker offers you a loan that allows you to take a larger position on your trades. If you lack funds to invest or trade, you can borrow the amount from your broker using MTF, and repay it as required.
Let us take a look at this example to understand MTF better. Jyotika is a newbie investor. While she wants to make it big, her trading account has a balance of ₹1 lakh. She sees a very profitable opportunity, and thanks to the MTF feature in her account, gets to borrow 4 times her purchasing power. This means that her broker allows an additional 4 times loan to her to invest, and she can now invest a total of ₹4 lakh!
Jyotika’s foresight helps her make a 20% profit on her investment. Had she invested only ₹1 lakh, she would have earned ₹20,000, whereas an investment of ₹4 lakh, got her a whopping ₹80,000! That’s the power of a Margin Trading Facility, multiplying the opportunities as well as your potential gains.
Demat Account for Margin Trading:
The borrowed funds in MTF, known as “margin,” ensure liquidity flows smoothly within the system. Funded by brokers, this facility extends investors’ buying capacity beyond their actual holdings. That’s why MTF is such a popular tool—it helps investors seize short-term opportunities that they otherwise might miss.
And here’s the bonus: pairing MTF with your Demat account not only gives you that extra edge in trading but also amplifies the potential benefits. With MTF, you’re not just trading with your money; you’re trading with multiplied power.
Here’s how:
● Intraday Margin Trading:
For investors using margin funding, intraday margin trading is probably one of the main attractions. Here, you buy and sell securities within the same day, requiring only a fraction of the total cost as collateral. With a trusted Demat account provider, you can enjoy a user-friendly platform for seamless intraday margin trading.
● It Brings Convenience and Accessibility:
When you open demat account online, it becomes a one-stop hub for all your investments. This centralized system allows brokers to thoroughly assess your financial portfolio before extending the margin trading facility (MTF). By doing so, your Demat account streamlines access to brokers and enhances your likelihood of securing clear funding limits.
● Share Pledging:
In margin trading, the extra shares you buy with borrowed money are held as collateral. However, with a Demat account, these shares are still visible and accessible to you, as required by SEBI rules. This gives you more flexibility, allowing you to grow your portfolio while staying open to future investment opportunities.
Conclusion:
The last few years have shown a steady increase in retail investor participation. With a bustling economy and access to easy capital, more and more people are getting the confidence that they too can invest in the market. However, as investors you need to keep in mind that margin trading also comes with a higher risk. In comparison to regular trading, you can get amplified gains when you use MTF, but at the same time, your losses can be amplified as well. You stand facing the risk of losing more than your initial investment. So make mindful decisions.
Disclaimer:
CBD:
Qrius does not provide medical advice.
The Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act) outlaws the recreational use of cannabis products in India. CBD oil, manufactured under a license issued by the Drugs and Cosmetics Act, 1940, can be legally used in India for medicinal purposes only with a prescription, subject to specific conditions. Kindly refer to the legalities here.
The information on this website is for informational purposes only and is not a substitute for professional medical advice, diagnosis, or treatment. Always seek the advice of your physician or another qualified health provider with any questions regarding a medical condition or treatment. Never disregard professional medical advice or delay seeking it because of something you have read on this website.
Gambling:
As per the Public Gambling Act of 1867, all Indian states, except Goa, Daman, and Sikkim, prohibit gambling. Land-based casinos are legalized in Goa and Daman under the Goa, Daman and Diu Public Gambling Act 1976. In Sikkim, land-based casinos, online gambling, and e-gaming (games of chance) are legalized under the Sikkim Online Gaming (Regulation) Rules 2009. Only some Indian states have legalized online/regular lotteries, subject to state laws. Refer to the legalities here. Horse racing and betting on horse racing, including online betting, is permitted only in licensed premises in select states. Refer to the 1996 Supreme Court judgment for more information.
This article does not endorse or express the views of Qrius and/or its staff.
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