What is Margin?
Margin means buying securities, such as stocks, by using funds borrowed from the broker. It is similar to buying a house on mortgage.
Margin amount is the money which the broker lends to the trader to buy more securities than what they could otherwise buy with the balance in their account.It is the difference between the total value of securities held in a trader’s account and the loan amount from the broker.
What is Margin Trading Facility?
Margin trading facility (MTF) is basically a loan offered by the broker to purchase stock against some collateral. Margin trading allows the trader to buy more stock than (s) he’d be able to normally.
In the most straightforward terms, using MTFessentially means purchasing stocks using loan taken from the broker against the securities you hold in your brokerage account, pledging them as collateral against new positions. Since you are borrowing money from the broker, it will attract interest charges.
Using MTF allows you to take advantage of short-term market opportunities and boost your profits, but it can also do the reverse. Leverage is a double-edged sword, so it needs to be used carefully.
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