Margin trading refers to the process whereby individual investors buy more stocks than they can afford to. Margin trading also refers to intraday trading in India and various stock brokers provide this service. Margin trading involves buying and selling of securities in one single session. Over time, various brokerages have relaxed the approach on time duration. The process requires an investor to speculate or guess the stock movement in a particular session. Margin trading is an easy way of making a fast buck. With the advent of electronic stock exchanges, the once specialized field is now accessible to even small traders.

The process is fairly simple. A margin account provides you the resources to buy more quantities of a stock than you can afford at any point of time. For this purpose, the broker would lend the money to buy shares and keep them as collateral.

In order to trade with a margin account, you are first required to place a request with your broker to open a margin account. This requires you to pay a certain amount of money upfront to the broker in cash, which is called the minimum margin. This would help the broker recover some money by squaring off, should the trader lose the bet and fail to recuperate the money.

Once the account is open, you are required to pay an initial margin (IM), which is a certain percentage of the total traded value pre-determined by the broker. Before you start trading, you need to remember three important steps. First, you need to maintain the minimum margin (MM) through the session, because on a very volatile day, the stock price can fall more than one had anticipated.