Monday, August 27, 2007

Margin Trading

  • What is Margin Trading? It is the trading of stocks thru margin buying. As defined in wikipedia, margin buying is when the trader borrows money (at interest) to buy a stock and hopes for it to rise (http://en.wikipedia.org/wiki/Stock_market#Margin_buying).
  • How do you do Margin Trading? Since you'l be using other people's money in margin trading, you need to invest in stocks with erratic prices. You buy the stocks when it is in its low(est) prices and immediatly sell it off when it gives you a little gain rather than wait for it to hit high prices. In my case, I usually sell my stocks immediately when it makes a 2% gain or when it hit 2 to 3 fluctuations higher. In the end of the month, you could make enough gain to pay off your monthly loan amortization.
  • How do you start Margin Trading? As a start, you could use your own savings to invest in the stock market. You search for a reliable online stock broker and deposit your funds with them. Now you could start trading by purchasing stocks (As an advice, its better to start with low-cap speculative stocks). When you'll get a feel of the game, you could start to borrow funds from friends and relatives to increase your equity. You could also take advantage of margin facilities offered by your stock brokers. Or you could even make personal loans from bank offering as low as .88% per month.

8 comments:

Gpu said...

HI, Do i need to maintain a different account for Margin Trading or should i need to carry my Demat Account(or having this facility for margin trading). And more over what is initial pre-requesties to start off with margin trading. Please let me know about this. Thanks for your help

allanum said...

To Gurpreet - Thanks for your inquiry. I'm not so sure with the guidelines of margin trading for other stock brokers but with the online stock broker im trading with, I need to invest atleast Php200,000 (US$4000) to avail of the margin facility of the same amount. The higher your investment with them, the more they could give the margin for you. You could email me if you have more inquiries about margin trading.

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