Stock Market · Introduction to Stock Markets

Margin

Margin is borrowed money from your broker. It lets you control a larger position than your actual capital.

How it works

You have ₹50,000. Your broker offers 5× leverage for intraday. You control a ₹2,50,000 position.

Position gains 2% → you make ₹5,000 → 10% return on your actual ₹50,000.

Position loses 2% → you lose ₹5,000 → also 10% of your capital. For a 2% stock move.

Margin types

• SPAN margin, minimum margin to hold a futures contract, set by the exchange. Changes daily based on volatility.
• Exposure margin, extra buffer charged by the broker on top of SPAN.
• MTM (Mark-to-Market), daily settlement of gains/losses on futures. Losses are debited from your account each evening. If the loss depletes your margin, you get a margin call.

Margin call

If losses eat your margin below the required level, your broker calls you to deposit more, or auto-squares your position. You cannot ignore this.

> March 2020: Nifty fell 38% in a month. Leveraged traders got wiped in days, not weeks. 5× leverage on a 38% crash = 190% loss, more than your entire capital, triggering forced liquidations.

The bottom line

Margin is a tool. Disciplined traders with strict stop-losses use it for efficient capital deployment. Beginners use it to turn small losses into account-ending losses.

Don't use margin until you can prove to yourself that you never skip a stop-loss.

4–5×Typical intraday equity leverage (broker-dependent)

100%Loss possible even beyond your capital if stop-loss is skipped with leverage

Takeaway. Leverage amplifies both gains and losses. A 10% loss without leverage = painful. A 10% loss with 5× leverage = catastrophic.