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What is Margin?

Margin is nothing more than the broker providing you with more purchasing power than you have in your account. The terms “margin” and “exposure” are used interchangeably. If a broker is providing “2x exposure,” that is the same as saying that the broker is providing “50% margin.”

For example, assume that you have Rs. 10,000 in your trading account, and your broker is providing you 50% margin (2x exposure) on Futures. That means that if you wanted to place a trade worth Rs. 10,000, and the exchange is requiring the full Rs. 10,000 from the broker, you would only be debited 50% of the trade value (Rs. 5,000) on the transaction. By the end of the trading day, however, you must exit your position.

Many brokers require a “minimum” or “initial” margin; this is nothing more than the minimum amount that you must maintain in the trading account at all times. For example, a broker might require Rs. 10,000 in initial margin; this means that you must have at least Rs. 10,000 in your trading account at all times.

Different levels of exposure (different margins) can be provided by a broker to different segments of products. E.g: 4x exposure on Equities, 2x exposure on Futures, and no exposure on Options.

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