Margin Trading?

Asiri_I · 1 Margin Trading? Tue Jul 26, 2011 10:45 pm

Asiri_I

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Can some body explain what is Margin Trading?

ISURU · 2 Re: Margin Trading? Tue Jul 26, 2011 10:47 pm

ISURU

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Imagine this: you're sitting at the blackjack table and the dealer throws you an ace. You'd love to increase your bet, but you're a little short on cash. Luckily, your friend offers to spot you $50 and says you can pay him back later. Tempting, isn't it? If the cards are dealt right, you can win big and pay your buddy back his $50 with profits to spare. But what if you lose? Not only will you be down your original bet, but you'll still owe your friend $50. Borrowing money at the casino is like gambling-on-steroids: the stakes are high and your potential for profit is dramatically increased. Conversely, your risk is also increased.

Investing on margin isn't necessarily gambling. But you can draw some parallels between margin trading and the casino. Margin is a high-risk strategy that can yield a huge profit if executed correctly. The dark side of margin is that you can lose your shirt and any other assets you're wearing. One of the only things riskier than investing on margin is investing on margin without understanding what you're doing.

http://www.investopedia.com

Marketinvest · 3 Re: Margin Trading? Tue Jul 26, 2011 10:54 pm

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As long as u dont know whts margin trading ur safe. Moment u know wht it is ur in utter danger. IT IS MILLION TIMES DANGER THAN A CREDIT CARD

sajeethk · 4 Re: Margin Trading? Wed Jul 27, 2011 6:18 am

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It is good to last year cos can see continue growth of the market. But this year if u like to hang ur self can go for margin trading.

PGCR · 5 Re: Margin Trading? Wed Jul 27, 2011 12:08 pm

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Why you all r discussing only the danger side of it.
if you can borrow @ 14% and if you could find a share which is performing more than 20% year, you can be simply be rich using margin providers money.

The way you manage it is the matter.

If you have a limit of 5Mn use only Half of it. Go for high ROE co's, High Dividend yield co's. Don't go for speculative shares using Margins.

Note : currently I'm having a margin facility with Leading Com. Bank.

sajeethk · 6 Re: Margin Trading? Wed Jul 27, 2011 12:45 pm

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if the market going up you can go for margin trading. but when you hit maximum margin limit you have start pump the money to account. if not they will start selling the shares. cos u have to maintain that limits always.

if not you will loose share market loss + interest too.

sin out market PE more that 23, I dont think market will grow 20% per year.