Day trading without margin is like a Unicorn, hard to catch, but attainable over time.
You may not have enough money to self suffice to day trading without margin in the beginning. As a result, you may feel pressured to win every trade.
Because, when traded with a margin, losses are huge, so are the profits!
Love the way how well you can mint money. As a result, many tend to trade with margins and lose more!
When you are garbled for a choice of day trading without margin or with margin, it depends on how good your strategy is.
Also, it depends on how firm your trading discipline is! Because more nondisciplined means, the lot you lose in the trade!
As a full-time trader, I’ve tried trading with margins. Because of the pressure, it builds when the bought stock goes down, as it normally would, BP increases. As a result, we feel pressured to lose more.
Markets are always going UP and suppose to come down, like a rhythmic heartbeat. Lub Dub.. Lub Dub..
But when trading with margins, you are pressured either way the trade goes. Because, when it goes up, you feel pressured not to lose the current position and feel to square it off. Or when it goes down, you feel the pressure of losing all your money!
So let’s try to decouple both the ways and see the advantages and disadvantages of day trading without margin.
By the Way, What is Day Trading Margin?
Day trading margin means it’s the extra amount of money, your broker adds in multiples to your deposit money.
Some brokers offer 2X the margin on your deposit when day trading. It means you can trade with ₹1,00,000 with a deposit of ₹50,000.
Is Day Trading Without Margin Better?
It’s always best, day trading without margin. Lemme tell you why?
- You are less likely to feel the pressure. As a result of this, you are more inclined to be calm and attain a target till it touches it.
- Won’t feel the pressure of losing. Because of this, when the natural tendency for the stock to fall, you won’t feel pressured.
- Stop losses are no more a Man Hunter Tiger. As a result, stop loss is left to stop the loss rather than moving up to make the loss!
How Can I be Day trading without margin?
See when you are trading futures, futures margins are really required to trade it. Because the futures margin is so huge that it’s almost 7 – 10 Lacks of Rupees.
I feel a lot better trading stocks without margin. Because, usually, I only require a small amount in thousands to trade stocks.
But being able to day trade just 1 stock will not make you enough money.
To be able to make enough profits, you at least need to trade 50 – 100 quantities of stock.
Let’s say, a Stock A is trading at ₹100, to trade 50 stocks, you require:
₹100 * 50 = ₹5000.
How much profit can you make day trading without margin?
- Considering, your example, to trade with 50 stocks of ₹100, you need ₹5000.
- When it moves by 1 point, that is 1%, you make ₹50.
- As a result of this, your profits are not big.
- So you would need to trade with at least 500 quantity to trade meaning an investment of ₹50000.
- If so, 1% move would pave a profit of ₹500.
So more profits you wanna make, more money, you are supposed to have for day trading without margin.
Why Did I Mention, Discipline and Strategy are Important While Day Trading with Margins?
A) Because discipline leads to squaring off at targets or stop losses. Both lead to honing and taking control of your trades. And, Strategy, when it’s right, you earn consistently with lesser losses.
So I mentioned, discipline and strategy are very important when trading with margin amount.
Advantages of Trading with Margins
Though advantages are huge, just the fact that losses can be huge is a point sufficient not to trade with margins.
However, without any bias, I’ll list the advantages and give it on a silver platter!
- When the strategy is good, your profits are huge.
- You may trade double the money you’ve and gain big with a small investment.
- Losses can be covered by profits if you know how to make consistent profits.
- Some brokers offer 7X the deposit, meaning, I can trade ₹70,000 with a meager ₹10,000 investment.
- Day trading with margins feels enthusiastic, as you mint more money with every trade.
Disadvantages of Day Trading with Margins
- Losses can run deep if you are not disciplined and have the tendency to let stock recover mindset.
- More brokerage to be paid if your profits are small and your trades are big.
- I feel more pressured trading with margins to square off than the latter.
- Auto squared off at 3:15 PM as brokers are supposed to calculate settlements accordingly.
- You lose a lot of your hard earned money with every loss.
Advantages of Day Trading Without Margins
- Your profit is your profit. Your losses are yours. You know how much you gain or lose.
- No pressure to square off unintentionally. Because of this, your trades are safe till the desired outcome is achieved.
- You control your destiny and your disciplined or not, your losses are capped to your investment.
Disadvantages of Day Trading without Margins
- A lot of money is left on the table. As a result, you earn lower than you probably can with margins.
- I feel an opportunity is lost.
- You may lose discipline, as you are not pressured to make the right decisions all the time.
What Instruments Can You Day Trade Without Margins?
A) Options trading is best suited and is not available to be traded with margins.
I feel you should trade without margins. This eliminates the pressure to be right always.
Though margins allow you to earn a lot in each trade, there are a lot of baggage on the back. As a result, you are supposed to be right always, your pressure increases on stock declines.
At the end, I conclude by saying, if you are like me, and can’t manage the pressure, day trading without margins is the best.
If you can manage the stress or don’t have any and can manage a disciplined way of trade, day trading with margin is best suited to you.
Hence, I conclude by saying, you are the best judge about your trading way and you can make your good own decisions with points above. As a result of this, I don’t have to point you to be a particular kinda trader 😛
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