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Stock Margin Trading & Leverage

 

Stock Margin Trading & Leverage

In stock margin trading, you are responsible for the loss.

If you have ₹100 and your broker gives ₹500 buying power (5× leverage):

  • ₹100 is your own money.
  • ₹400 is borrowed from the broker.

What Happens if the Stock Falls?

  • Your ₹100 balance starts decreasing first.
  • If losses become large, the broker may:
    • Issue a margin call.
    • Automatically sell your shares.

Example

You buy ₹500 worth of stock using:

  • ₹100 your money
  • ₹400 borrowed money

If the stock falls by 20%:

Loss = ₹100
Your balance becomes ₹0

If the stock crashes more before the broker exits the trade, you may owe extra money to the broker.

Warning: Leverage can increase profits, but it also increases losses and risk.

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