The Basic Regarding Margin That You Must Be Aware Of

Do you do trading in commodities? If you do then you must have certain basic knowledge about certain factors so that you can do effective trading and earn more. When you trade with future contract then there is a deposit that you have to make. Let us today know about such deposits.

Types of deposits that need to be made

As I was saying that there are certain natures of deposits that you need to make when you trade with future contracts. These natures of deposits are called MCX Margin. If we see then there are four types of such deposits.

Initial Margin: This is the initial deposit that you have to put down as capital when you start to do business after opening a trading account with a broker. This amount acts as collateral and allows you to have entry into the futures market.

Mark to Market Margin: This nature of margin is calculated daily. The nature of calculation is the difference between the closing and the opening price of a contract.

Special Margin: The reason for the introduction of this nature of Margin is to have an effective control over excessive speculation so that the interest of common traders can be protected.

Delivery Margin: This nature of margin need to be deposited as a contract approaches the period of delivery.

Facts that you must have a clear idea

  • If you wish to have Margin then you need to open an NBFC account along with the Demat account.
  • There is as such no minimum requirement that you need to deposit. You can start with an amount with which you are comfortable with.
  • If you wish to trade in a market of commodity then it is seen that you require Rs. 20000 as margin.
  • If you wish to deal with currencies then it depends upon the nature of the contract that you intend to deal with.

What is funding of margin?

This is a nature of loan facility which allows you to have money so that you can start your trading in shares. You have only to pay a fixed percentage of the total value and the reaming part is paid by the lender. This is very beneficial if you deal with trades on the basis of delivery and hold the investment.

Advantage that you can achieve

There are advantages that you can achieve by proper utilization of MCX Margin. The most important advantage is that with a small amount of money you can have trading done in a significant higher amount of money.

A word of caution

You must be aware that margin is like a double edged sword. The profit and loss both are amplified to a large extent. It is always prudent that you do your trading following all the rules and regulations so that you can earn more. It is always good to know how you can use margin in the right manner so that you can have all the benefits.