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SEBI’S NEW MARGIN POLICY HAS BEEN UPDATED!!

SEBI MARGIN POLICY 2022

There has been a lot of talk recently over SEBI’s new Margin Pledge guidelines. After SEBI refused to extend the deadline, the new rule took effect on September 1, 2020.

In this article, I’ll give a quick overview of the topic and how it affects retail traders.

To obtain a clear idea, read the entire blog.

WHAT EXACTLY IS THE POLICY?

Aside from VAR+ELM (equity) and Span + Exposure, there will be no extra margins beyond September 1, 2021. (F&O).

THE FACTS:

Many YouTubers and inexperienced traders are propagating allegations that exchanges are fully eliminating intraday margin. It’s entirely false.

Because most equities have more than 20% VAR and ELM, this indicates that the maximum intraday leverage for stocks is 20% of the trading value. In other words, after September 1, 2021, you will receive 5X.

In F&O, you must pay the full margin up front, which is Span + Exposure, or roughly 5X.

In other words, starting September 1, 2021, you will receive a flat 5X regardless of whether you trade intraday or positional.

With the Securities and Exchange Board of India’s tougher margin requirements due to take effect in May, the cost of capital for traders and brokers is expected to skyrocket. Beginning Monday, traders must bring in at least 50% of their futures and options margin requirement in cash, and brokers cannot utilise the cash of one client to satisfy another’s margin requirement with stock exchanges. Brokers’ capital requirements are projected to rise as a result of the changes, which could make it more difficult.

My Experience:

I’ve been actively trading in the market since 2008, and throughout that time, I’ve met countless traders. Meet a lot of successful full-time traders and a lot of failing full-time traders.

What effect would it have on retail INTRADAY traders?

Let me be more explicit here and explain it using my own INTRADAY trading as an example.

I have a capital of roughly $8-10 million. I traded intraday in my Zerodha account, which offers 10X leverage right now. i.e., using margin, I can purchase and sell scripts worth 80 lakhs to one crore intraday.

Let’s have a look at an example.

On May 6, 2021,

I traded intraday on the following markets:

BNF OPTION, AXIS BANK, BAJFIN, & PIDILITE, and generated a profit of Rs. 1.2 lacs.

  • I make money via my abilities, not by leverage. Leverage is merely a driving force.
  • Because my pupils and I don’t use a lot of leverage, these margin limits won’t have a big impact on us.
  • We have a solid risk management strategy in place that is compliant with SEBI’s guidelines.
  • It will affect you if you previously traded with a broker who offered 20X or 30X leverage.

Impact of volume:

The volume, in my opinion, will not be much affected. FII, DII, Pro desks, and other similar institutions account for 90% of trading volume.

And I’ve had a careful look at their work. No major fund uses a margin of greater than 2X to 3X. They have enough money to manage their situation.

From September 1, 2021, I foresee an increase in volatility rather than a drop in volume. If you’re an intraday trader with a solid strategy and risk management system, this is fantastic news. If you know how to ride this volatility, you’ll be able to make a good profit.

Reality is harsh:

Many people have expressed dissatisfaction with the Margin rule. People who aren’t even profitable traders account for 90% of those who complain. I have never seen a trader make consistent money by using really high leverage in my 9+ years of trading. I’ll continue to trade in the same manner as before.

I’ve noticed a lot of misunderstandings about this new SEBI rule. Hope

CONCLUSION

Finally, if you are currently trading consistently and profitably, it will have little influence. In rare circumstances, you may need to add an extra 10%-20% to your budget, but not more.

If you’re a losing trader, you’ve now got a new topic to argue about.

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