Glossary
What is Margin? Meaning, Example & Why It Matters
The money or collateral you must keep with your broker to take and hold leveraged positions.
Margin is the amount you need in your trading account to open certain positions, especially in futures, option selling and intraday trades. Instead of paying the full value of the position, you deposit a portion as security against possible losses. Exchanges set the minimum margin based on risk models, and brokers may ask for more.
Why Margin matters to you
Margin creates leverage: you control a larger position than your cash alone would allow. This magnifies both gains and losses. If the market moves against you and your account falls below the required margin, you face a margin call and must add funds quickly, or your broker may close your positions, often at an unfavourable price.
Margin requirements are not fixed. They can rise suddenly during volatile markets, around events or near expiry, which can force traders to reduce positions. Shortfalls in margin can also attract penalties from the exchange that brokers pass on to clients.
Practical tip: never use all your available margin. Keep a buffer of extra funds so a sudden move or margin increase does not trigger forced square-off. Check your broker's margin calculator before placing a large order.
Example: Illustrative only: if a position is worth ₹4,00,000 and requires ₹80,000 margin, a 5% adverse move means a ₹20,000 loss, which is a quarter of your margin.
See it in rupees: every charge and tax on a real trade, at every broker. Open the brokerage calculator
Related terms
- GlossaryPeak Margin
A rule requiring traders to hold sufficient margin at random intraday snapshots, not just at the end of the day.
- GlossaryMTF (Margin Trading Facility)
A broker-funded facility that lets you buy shares for delivery by paying only part of the cost upfront.
- GlossaryPledge
Using shares or other securities in your demat account as collateral to get margin for trading.
- GlossaryFutures
A contract to buy or sell an asset at a fixed price on a future date, traded in standard lot sizes.
Frequently asked questions
What is a margin call?
A margin call is a demand to add funds when your account falls below the required margin. If you do not, your broker may close positions.
Can margin requirements change during the day?
Yes, exchanges can revise margins, and brokers can change their own requirements, especially in volatile markets.
Is there a penalty for margin shortfall?
Exchanges can levy penalties for margin shortfalls, and brokers usually pass these on to the client.