The best and popular leveraged trading methods in India are Margin Trading Facility (MTF) and intraday trading. Though both provide access to trade with more money than you have. However, the risk exposure, cost structure, and time horizon are not the same.
Bajaj Broking provides traders the access to both, making it beneficial for traders to choose according to their trading approach.
Understanding Leverage: MTF vs. Intraday Trading
Simply put, Leverage offers traders to control a larger trade with a smaller amount of their own money.
MTF (Margin Trading Facility):
- MTF position does not require a closing on the same trading day.
- MTF is limited to Group 1 securities, approved by SEBI.
- The interest is charged on the amount funded by the broker.
- MTF allows traders to buy stocks without paying the full amount upfront.
Intraday Trading:
- All trades are opened and closed on the same day.
- Preferred by traders who closely monitor the market events.
- Quick decision-making is important.
Intraday positions are not carried forward, so there is no chance of overnight risk.
If we talk about the key difference between them then, MTF gives traders the flexibility to hold positions for a longer period, with the chances of overnight risk. Intraday trading avoids this risk as it is all about making the most of market movements within a single day.
|
Feature |
MTF |
Intraday |
|
How long can you keep your position open? |
For several days or longer. |
Only the same trading day. |
|
Buying power available |
Additional buying power through broker funding. |
Usually offers higher leverage for short-term trades. |
|
Paying Interest charges |
Interest is charged on the broker funded amount as long as the position remains open. |
Here positions are closed on the same day, so no interest charges. |
|
What happens after market hours? |
If the position stays open, any overnight news can affect the stock price. |
The position is already closed, so there are no overnight market movements. |
|
How quickly do you need to make decisions? |
In this traders have more time to analyse the market. So, less pressure. |
In this, traders need to make decisions fast. |
|
What market risks should you be aware of? |
Both daily market movements and overnight events can affect the stock price. |
The trade is affected only by price movements during market hours. |
|
Best suited for |
Traders looking to hold positions for a few days. |
It’s a good option for traders who aim to benefit from same-day price movements |
|
Key thing to remember |
More time in the market means more exposure to market events. |
Having higher leverage can help to increase potential gains |
Comparing the Risks: MTF vs Intraday
Though MTF and intraday trading involve leverage, the risks are not the same. In intraday trading, positions are opened and closed on the same day. With MTF, traders have the flexibility to hold positions for weeks or even months.
Managing Risks with Bajaj Broking MTF
Risk management is important when using MTF trading. These simple ways can help you:
1. Monitor Market
MTF positions can be carried forward, it is important to regularly track the stock market.
2. Decided Exit Strategy
Before entering a trade, decide how much loss you can manage.
3. Don’t Hold Positions Longer
Don’t hold the position unnecessary as you can encounter unexpected market events.
4. Suitable Stocks
Trade only in stocks approved under the MTF for smooth trading.
5. Maintain Margin
Sufficient margin can help you avoid margin calls
6. Total Return
Don’t forget to include interest charges and other trading costs, while calculating potential return.
Key Takeaways
MTF has overnight risk, while Intraday there is no overnight risk.
Intraday trading comes with higher leverage, but traders need to make quick decisions as market is unpredictable.
- MTF allows traders to hold positions for days, weeks or even months.
- Both are good approaches for traders, but they both have different risk capacities.
- Choosing between the two fully depends on trading style and capital.
Conclusion
MTF and intraday have different purposes despite both offering leverage. MTF is short-term positional trading, where traders hold the position for multiple days. On the other hand intraday trading focuses on capturing price movements within the same day. Understanding the risk and differences between the two help traders to choose the right one while using Bajaj Broking’s platform.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
Disclaimer: This article is from the Brand Desk. User discretion is advised.
