Intraday trading means buying and selling stocks within the same day, i.e., within a single market session. You open your position at any time during the active market hours and then close it before the market closes. Intraday trading can offer quick returns, and that is why it is preferred by many active traders.
Intraday trading is also called margin trading, as it works on the concept of margins. Margin is the minimum amount that you are required to deposit with the broker. After that, you can buy stocks in multiples of the margin deposited.
For instance, say you want to invest Rs.1 lakh in 100 units of a particular stock. The margin requirement is 20%. This means that you would have to deposit Rs.20,000 with your stock broker, against which you can buy Rs.1 lakh worth of shares on an intraday basis.
Corollary margin can also be termed leverage. Leverage is expressed as a multiple, which denotes that against the deposit that you make, you can trade up to a specified amount. For instance, say the leverage is five times. This means that if you deposit Rs.10,000 with the broker, you can invest up to Rs.50,000 in stocks.
The margin requirements vary based on their price movement and volatility across different stocks. However, with many brokers’ latest zero cash fund feature, you can trade without any margin money.
The concept of zero cash fund
The zero cash fund allows you to do intraday trading without maintaining any balance in your trading account. The facility will enable you to trade in stocks either by depositing a small amount or holding an equity portfolio with the broker.
Your portfolio acts as collateral for the margin trading facility and allows you to invest in stocks without actually investing your money. After that, you can pay later for the investments that you have made.
Features of the zero cash fund
● You might be required to hold an equity portfolio of a specified size to avail the zero cash fund facility.
● There might be an interest rate applicable to your trades on the MTF facility.
● The trading volume would depend on the equity portfolio that you own.
● Many brokers allow intraday trading in stocks, futures and options, and other derivatives.
Benefits of the zero cash fund
● You don’t have to maintain a cash balance in the account, which frees up your capital. You can use this freed up capital for other investments.
● The fund is entirely flexible, allowing you to customise it according to your needs.
● The problem of liquidity is solved.
● You can earn profits even without investing actual money.
To conclude, understand the concept of the zero cash fund and opt for intraday trading without tying up your money.