Category: Trading

Difference Between ITM, OTM, ATM in Call and Put Options

In options trading, terms like ITM (In the Money), ATM (At the Money) and OTM (Out of the Money) are part of everyday conversation for any trader. But if you are new to options trading, it is very important to understand the meaning of these three terms and know the difference between them, because they determine the value and risk of an option.

In this blog, we will learn about what ITM,OTM, and ATM options are and most importantly, how their definition differs in the context of Call Options and Put Options.

What is a Call Option?

A call option is a derivative contract that grants the buyer the right, but not the obligation, to purchase a stock or other asset at a predetermined strike price on or before a specified expiration date. Traders usually buy call options when the price of a stock is expected to rise. In this case, if the stock’s market price rises above the strike price, the option becomes “in the money” and starts generating profits.

The value of a call option comprises of two things:

Intrinsic Value (if ITM)
Time Value (decreases over time)

What are ITM, ATM and OTM in Call Option?

When you buy or sell a Call Option, its value depends on the difference between its strike price and the current market price (spot price). Three terms are used to understand this difference: In the Money (ITM), At the Money (ATM), and Out of the Money (OTM). Let us understand these three terms in detail in the context of Call Option:

In The Money (ITM) – Call Option

When the strike price of a Call Option is less than the current price (spot price) of the stock, then that option is considered In the Money (ITM). In this case, the option has intrinsic value because exercising it immediately would allow the buyer to purchase the stock below its market price, resulting in a profit.

Example : If Reliance stock is trading at ₹1,500 and you have a Call Option of strike price ₹1,450, then the call is said to be ITM.

At The Money (ATM) – Call Option

When the strike price and the current price of the stock are almost equal, the option is said to be At the Money (ATM). In this situation, the option has little to no intrinsic value and consists primarily of time value, meaning its worth is derived mainly from the time remaining until expiration and the potential for favorable price movement.

Example: Reliance stock is at ₹1,500 and you hold a Call Option of ₹1,500, then it is an ATM call option.

Out of The Money (OTM) – Call Option

When the strike price is higher than the current price of the stock, the call option is said to be out of the money (OTM). In this case, the option has no intrinsic value, and its value is based only on its time value. If the stock price does not rise over strike price by expiry, the option will expire worthless.

Example : If Reliance is at ₹1,500 and you have taken a call option of ₹1,700, then it is OTM.

If you are trading in call options, it is important to understand these three moneyness conditions as they determine how quickly your position can become profitable or expire worthless.

What is a Put Option?

Put Option is a derivative contract that gives the buyer the right to sell a stock or asset at a specified strike price by a specified expiry date. Whether to exercise this right or not is entirely up to the buyer. Buying a Put Option is beneficial when the price of a stock or asset price is expected to fall. If the market price goes below the strike price, the option becomes “In the Money” and the buyer starts getting profit. Put Options are often used to hedge existing portfolios or make speculative profits from a falling market.

Example: If Nifty is trading at 25,000 and you have bought a Put Option of strike price 25,500, then this option will be ITM because you have the right to sell at a higher price than the market.

What are ITM, ATM and OTM in Put Option?

The value of Put Options depends on where its strike price stands in comparison to the current market price (spot price). To understand this, we use three terms – In the Money (ITM), At the Money (ATM), and Out of the Money (OTM).

Below we will understand what these three conditions mean in the context of Put Option and how they affect trading:

In The Money (ITM) – Put Option

A put option is considered In the Money (ITM) when its strike price is higher than the current market price (spot price) of the underlying stock. In this case, the option has intrinsic value because exercising it immediately would allow the seller to sell the stock at a price above its current market value, resulting in a profit.

Example: Suppose a stock is trading at ₹1,900 and you have a Put Option of strike price 2,000 – then it will be ITM.

At The Money (ATM) – Put Option

When the strike price and the current market price are almost equal, the option is said to be At the Money (ATM). In this case, the option has no intrinsic value, only time value.

Example : The stock is at ₹1,900 and you bought a Put Option for ₹1,900 then it is called ATM.

Out of The Money (OTM) – Put Option

When the strike price is lower than the current price of the stock, the Put Option is said to be Out of the Money (OTM). OTM puts have no intrinsic value. However, OTM puts can still have time value, which reflects the potential for the stock price to drop below the strike price before expiration, giving the option a chance to become profitable.

Example : Stock is trading at ₹1,900 and you have a Put Option at ₹1,800 then it is OTM.

Understanding the moneyness of Put Options is important because it determines how much profit you can make in a falling market and with how much risk. Knowing the difference between ITM, ATM, OTM is very important for smart trading decisions.

Difference Between ITM, ATM and OTM Options

Criteria	In the Money (ITM)	At the Money (ATM)	Out of the Money (OTM)
Meaning	Call: Strike Price < Spot Price Put: Strike Price > Spot Price	The strike price is nearly equal to the current market price.	Call: Strike Price > Spot Price Put: Strike Price < Spot Price
Intrinsic Value	Present	Exists to a minimal extent (effectively zero).	Absent
Option Premium	Highest (intrinsic + time value).	Moderate (primarily time value).	Lowest (only time value).
Time Decay Impact	Less impact (mostly intrinsic value)	Highest impact (purely time value)	Rapid decay if stock price doesn’t move in favourable direction
Use Case	Conservative trading approach	To profit from quick moves	Speculative bets, breakout trades

Common Mistakes Traders Make in Understanding ITM, ATM, and OTM

Some of the common mistakes traders should avoid while trading ITM, OTM and ATM options are listed below:

Underestimating risks of OTM options as they are cheaper : Many new traders buy OTM options because of their lower premium. But they forget that lower prices does not always mean higher profits. OTM options do not have intrinsic value, and if the price does not move till expiry, the entire premium can become zero.
Ignoring Theta Decay : ATM and OTM options lose value the fastest because their entire premium is based on time value. Especially near expiry, their value decreases rapidly – what we call theta decay. Without favorable price movement, these options can quickly become worthless.
Not understanding Risks while selling ITM options : Many traders sell ITM options without knowing that if the option is ITM near expiry, they may have to deliver the underlying asset (physical settlement).
Not tracking the Spot Price : To correctly understand the moneyness of the option (ITM/ATM/OTM), it is important to look at the real-time spot price. Many times traders make decisions based on the future price, which can lead to wrong strike selection and result in losses.

Conclusion

ITM, ATM and OTM options are not just technical terms, they are the foundation of option trading. Whether you buy or sell a Call or a Put, understanding the moneyness can be the difference between profits and losses. In options trading, predicting the correct direction is only half the battle. Choosing the right strike price is equally crucial. It is essential to choose between ITM, OTM, and ATM options based on the risk-reward ratio of your trading strategy and your overall risk management approach. It is advised to consult a financial advisor before trading options.

Frequently Asked Questions (FAQs)

What is the full form of ITM, ATM and OTM?
ITM: In The Money, ATM: At The Money, OTM: Out of The Money.
How to know if an option is ITM, ATM or OTM?
Check the strike price and market price to determine whether an option is ITM, OTM or ATM.
Which option is safer to buy?
No particular option can be considered the safest to buy, as its value can change significantly with market movements, time decay, and volatility. The choice depends on your trading objective, risk tolerance, and market outlook.
Why is ATM option premium higher than OTM options?
ATM option premiums are higher than OTM options because ATM options have the highest time value. At the money, the probability of the option expiring in the money is greater than for OTM options, making them more valuable to traders.
Can OTM become ITM before expiry?
Yes, an OTM option can become ITM before expiry if the underlying asset’s price moves favorably beyond the strike price, giving the option intrinsic value.

August 15, 2025

What is SPAN & Exposure Margin?

You have certainly heard of terms like SPAN and exposure margin if you have ever worked in futures and options (F&O) trading. They may appear to be financial jargon at first, but knowing them is essential if you want to trade securely.

In essence, margins are the up-front money you must deposit with your broker in order to enter derivatives trading positions. It is a combination of two factors, exposure margin and SPAN margin, each of which has different roles in trading risk management.

This blog will explain what margin in F&O trading means, how exposure and SPAN margins are determined, and why they are important for all traders to understand.

What is the Margin in Trading?

You must pay an initial deposit before you buy or sell contracts when trading futures and options (F&O). This is called margin. Think of it as the minimum balance your broker requires in your trading account to ensure you can cover potential losses and avoid defaulting on your trades.

You can take on positions that are bigger than your available capital would normally allow because of margin, which acts as a financial buffer. Rather than paying the entire contract value when you enter a trade, you only pay a percentage, called the initial margin. For instance, all you need to open a position on a ₹900k equity futures contract with a 15% margin requirement is ₹135k.

This total margin is generally made up of two parts:

1. SPAN Margin

2. Exposure Margin

What is SPAN Margin?

In 1988, the Chicago Mercantile Exchange (CME) created the risk-based margining system known as SPAN or Standard Portfolio Analysis of Risk. SPAN margin simulates a number of outcomes, including price and volatility changes, to calculate the worst-case loss your portfolio could sustain. It allows for offsets between correlated trades by calculating margins for your entire portfolio rather than just for individual positions.

Since SPAN uses scenario analysis instead of a fixed-percentage margin, the amount of margin needed differs according to the time for expiry, portfolio composition, and volatility. If positions offset one another, SPAN can reduce capital requirements by evaluating a full basket of positions at once.

What is Exposure Margin?

The exposure margin is an extra safety net on top of the SPAN margin. It is collected to protect against any sudden changes in the market that the SPAN system might not have taken into account.

You could say that, a “safety net” that brokers or exchanges need in case something goes wrong. This is fixed as a percentage of the total contract value and changes based on the asset and the rules of the exchange.

For Example

Let us say you want to buy Nifty Futures.

SPAN Margin – ₹1,50,000

Exposure Margin – ₹40,000

Total margin needed = SPAN Margin + Exposure Margin = ₹1,90,000

To take the position, you need to have this much money in your account.

Read Also: What is Stock Margin?

Difference Between SPAN Margin & Exposure Margin

Basis	SPAN Margin	Exposure Margin
Assessment Basis	Scenario-based, portfolio-wide risk calculations	Fixed percentage buffer on trade value
Flexibility	Varies with volatility; best for F&O trades	Static cushion in addition to SPAN
Usage	F&O segments using SPAN model	All leveraged positions, across trades
Offset Benefits	Allows netting across long/short in a basket	No offsetting, each trade stands alone

Why is Margin & SPAN Important for Traders?

Understanding how margin and SPAN margin work is not only beneficial but also necessary if you trade futures and options or use any form of leverage.

1. They Help You Manage Risk

The purpose of margin, particularly SPAN, is to ensure that you have adequate money in your account to deal with unforeseen market fluctuations. If things go wrong, it acts as a safety net to shield you and your broker from suffering significant losses.

2. Efficient Use of Capital

Leverage allows you to make larger trades without having to pay the entire amount up front, which is one of the best things about margin. By examining your complete portfolio, SPAN goes one step further. You might require less margin if certain trades (such as a call and a put) balance each other out. This means greater adaptability and more economical use of your funds.

3. Adhering to SEBI Regulations

You have undoubtedly heard of SEBI’s margin regulations if you trade in India. Before you enter a trade, brokers must gather exposure margins and SPAN. If you do not meet expectations, you may be penalised or, worse, have your positions automatically closed. You can prevent surprises and maintain control by being aware of this.

4. Maintaining Flexibility in Real Time

Markets are dynamic. The SPAN margin is recalculated every day, sometimes even within a single day. You can make timely adjustments to your positions, lower your exposure, or add money if you are aware of these changes.

Conclusion

Futures and options trading offer huge possibilities, but they also carry a lot of responsibility. Knowing how exposure margin and SPAN margin operate can significantly impact how safely and effectively you trade. Both are equally significant. You can prevent unnecessary surprises like margin calls and auto square-offs when you understand how much margin you need and why.

Therefore, always check your margin needs before making a trade, put aside a small amount as a buffer, and adjust your strategy accordingly. You’re already playing the game better than most when you know the rules.

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6	Margin Against Shares: How Does it Work?
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Frequently Asked Questions (FAQs)

For what reason do I require both margins?
The SPAN margin covers the expected risk. It is based on different market scenarios and is meant to protect against likely price changes. On the other hand, exposure margin protects against unexpected risks.
Do these margins fluctuate daily?
SPAN margin can change when market volatility increases. Unless regulations change, the exposure margin usually remains constant.
Who determines the amount of margin I require?
Your broker complies with the regulations set forth by the exchange (such as the NSE). Additionally, SEBI closely monitors to ensure that everything is secure and fair.
What happens if my account doesn’t have enough margin?
You may receive a margin call from your broker requesting additional funds. They may automatically end your position if you don’t.
Is it possible to lower the SPAN margin that I must pay?
Indeed! Both your overall risk and your SPAN requirement decrease when you make hedged trades, such as combining a call and a put.

August 13, 2025

Use Cases of AI in the Stock Market

AI has transformed the world in every possible manner and is almost used in every industry, and the stock market is no exception. AI has transformed the stock market’s operations, from executing trades with precision to forecasting stock price movements using historical data and real-time news.

In this blog, we will give you an overview of use cases of AI in the stock market, along with its key benefits and risks.

AI in Action: Transforming the Stock Market

In the world of the stock market, artificial intelligence (AI) refers to the application of complex algorithms and machine learning models to analyze market data, identify patterns, and decide whether to trade or invest. It involves the automation of processes like analyzing sentiment, risk assessment, price prediction, and portfolio management that used to need human intelligence.

Over time, AI has become an essential tool for traders and investors, enabling faster and more accurate decisions than traditional methods. By processing vast amounts of data in real time, it can detect subtle market trends that might be invisible to the human eye. AI-powered systems can also adapt to changing market conditions, continuously learning and improving their performance. This capability helps reduce emotional bias in trading, allowing for a more disciplined and data-driven approach to investing.

Features of AI in the Stock Market

The key features of AI in the stock market are as follows:

Analyse Large Datasets: Massive volumes of structured data, like historical prices, trading volumes, financial statements, etc., can be used, processed, and analysed by AI at a speed and scale which is not possible for humans.
Automated Trades: AI makes it possible for buy and sell orders to be executed automatically based on set rules or strategies.
Sentiment Analysis: AI analyses public sentiment from reports, social media, and news using Natural Language Processing (NLP), and provides its impact on price.

Use cases of AI in the Stock Market

The most significant and impactful applications of AI in the stock market include:

Prediction of Market Movement: To forecast future stock movements, artificial intelligence (AI) systems examine huge amounts of past price data, volume patterns, and technical indicators.
High-Frequency Trading: AI-powered high-frequency trading systems can process millions of transactions per second, capitalizing on microsecond price discrepancies across global markets.
Sentiment Analysis: To assess market sentiment, tools that use AI look for information from news articles, earnings reports, and social media platforms.
Management of Portfolio: Investment portfolios are created and rebalanced by AI-driven robo-advisors according to the risk appetite, investment horizon, and goals of each investor.
Detection of Fraud: Artificial intelligence (AI) algorithms help in the detection of insider trading patterns, market manipulation, and unusual trading activity.
Customer Service: AI-powered chatbots are used by brokers to improve customer engagement and operational efficiency by responding to investor inquiries, recommending stocks, and facilitating trade execution.
Preparing Strategies: By leveraging historical data, AI can develop and test trading strategies to assess potential risks and profitability before they are executed in real markets.

Benefits of Using AI in the Stock Market

The significant benefits of using AI in the stock market are as follows:

Decision Making: AI helps an individual in analysing large amounts of data collected from multiple sources in less time and make an informed decision.
Faster Execution of Trade: Through AI algorithms, one can execute trades within microseconds, as this can give traders an additional benefit while executing a trade.
Zero Emotions: Since AI operates without emotional influence, it minimizes the impact of feelings like fear or greed, making decisions solely based on data and logic.
Round-the-Clock Monitoring: AI trading systems can work 24/7 and continuously scan the market for trading opportunities.
Risk Management: AI models help minimize potential losses by continuously monitoring market conditions and adjusting risk levels in response to stock price movements.

Read More: Benefits of AI in the Stock Market

Risk of Using AI in the Stock Market

There is a certain risk of using AI in the stock market; a few of such risks are mentioned below:

Limitations in Real Markets: Since AI relies heavily on backtested data, its strategies may not always perform well in real-world scenarios, where market sentiments are often influenced by human emotions.
Transparency: AI models generate solutions based on complex calculations, but often offer limited explanation of their reasoning, resulting in a lack of clarity.
Error: If any coding error occurs in creating AI driven systems, it can lead to significant losses in automated trading.
False Information: AI is not smart enough to analyse which news is false and which is true; therefore, any false news spread online can lead to wrong trading decisions and cause significant losses.
Cyber Security: Any kind of cyber attack might impact the AI system, as cyber attackers can control the bot and intervene in the automated trading system.

Read Also: Can AI Predict the Stock Market?

Conclusion

On a concluding note, AI has brought a revolutionary shift to the stock market in recent years. It is now widely used for risk management, robo-advisory services, and many other applications, enabling the analysis of vast amounts of data within seconds. However, using AI also comes with significant risks, such as cybersecurity concerns, decisions based on false information, etc. Therefore, it is advisable to use AI in the stock market analysis only after consulting your investment advisor.

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Frequently Asked Questions (FAQs)

Can a retail investor use AI tools?
Yes, there are many platforms that provide AI tools for retail investors, allowing them to get the benefit of robo-advisory, stock screening, execution of trades, etc.
What are the risks involved in using AI tools in the stock market?
The significant risk involved in using an AI tool in the stock market is the lack of transparency, cyber threats, false information, etc.
Is it legal to use AI in the Indian stock market?
Yes, use of AI tools in Indian stock markets is legal, but institutions must comply with SEBI guidelines on algorithmic trading, risk management, and model governance.
How does AI predict the stock price movement?
AI predicts the stock price movement based on historical data, news, technical indicators, and financial reports.
Can AI analyse news related to a particular stock?
Yes, AI can analyse news related to a particular stock as it uses the Natural Language Processing (NLP) algorithms that reads the news, posts and discussion related to a particular stock for making trading decisions.

August 12, 2025

10 Best Chart Pattern Books for Traders

If you want to be successful in trading, reading chart pattern books is as important today as it was in the past. In 2026, where the market has become even faster, volatile and technology-driven, identifying the right chart pattern can greatly improve your trading decisions. Whether you are a beginner or an experienced trader, the best chart pattern book can enhance your technical analysis skills.

In this blog, we will tell you about 10 such excellent and updated best trading chart patterns books which are still relevant and can help you realize consistent profits.

Top 10 Best Chart Patterns Books for Traders (2026 List)

Book Name	Author	Best For	Key Highlights
Encyclopedia of Chart Patterns	Thomas N. Bulkowski	Intermediate Advanced traders	Includes approximately 70–75 reversal and continuation patterns, statistical data, and failure analysis
Technical Analysis Using Multiple Timeframes	Brian Shannon	Intermediate Advanced traders	Accurate identification of chart patterns in a multi‑timeframe context, trend alignment
Trading Classic Chart Patterns	Thomas N. Bulkowski	Intermediate traders	Entry/exit levels, trade setups, real examples for each pattern
Japanese Candlestick Charting Techniques	Steve Nison	Beginners Intermediate	Candlestick foundations for pattern analysis
Trading Price Action Trends	Al Brooks	Advanced traders	Deep understanding of repeated estimation methods, trend-following and reversal patterns
Price Action Breakdown	Laurentiu Damir	Beginners Intermediate	Focus on high-probability patterns such as pin bars, inside bars, engulfing bars
Trading Price Action Reversals	Al Brooks	Advanced	Reversal patterns, entry setups, trade structure analysis
The Visual Guide to Chart Patterns	Thomas N. Bulkowski	Intermediate	Visual aids and structure-based examples for pattern recognition.
Candlestick Charting Explained	Gregory L. Morris	All Levels	Focus on standardized 89 candlestick patterns, with an emphasis on pattern identification and false signal filtering
Chart Patterns	Bruce M. Kamich	BeginnersIntermediate	Formations like flags, head‑and‑shoulders, double bottoms, breakout timing and pattern spotting guide

Brief Overview of the Chart Patterns Books

A summary of the 10 best Chart Patterns Books has been given below:

1. Encyclopedia of Chart Patterns

This book is considered to be a definitive reference in the world of chart patterns. Thomas Bulkowski has explained more than 60 classic chart patterns such as head & shoulders, triangles, flags etc. with statistical analysis. The success rate, failure rate, average price movement and trading strategies of each pattern have been explained in detail. This book is very useful for traders for pattern-based decision making and price prediction. The special thing is that the author has also analysed the performance of each pattern on the basis of historical market data.

2. Technical Analysis Using Multiple Timeframes

This book by Brian Shannon is excellent in explaining the concept of multiple timeframes. Although it covers broader technical analysis, the depth of price structure and chart interpretation in it is very high. The author explains how the same chart can be analysed in different timeframes to decide better entries and exits. It provides practical ways to integrate trend alignment, support-resistance zones and moving averages with price action, making trading decisions more confident.

3. Trading Classic Chart Patterns

This is Bulkowski’s second important book that focuses specifically on classical chart patterns. It takes a deep dive into about 50 traditional patterns such as cup & handle, double top, triple bottom, etc. The psychology behind each pattern, entry-exit rules and performance statistics are provided. Also, real-world examples and visual charts make it very practical. This book is for those traders who want to make pattern recognition their core trading tool.

4. Japanese Candlestick Charting Techniques

This classic book by Steve Nison gives Western traders detailed knowledge of candlestick charting for the first time. It explains more than 50 candlestick patterns such as doji, hammer, engulfing, morning star. The meaning, formation, market psychology and trading signals of each pattern are given in a very systematic manner. This book is a reference guide not only for beginners but also for advanced chartists. The integration of candlestick and bar charts is also explained well in it.

5. Trading Price Action Trends

This book by AL Brooks gives scientific depth to price action trading. In this, chart analysis is done only on the basis of price bars, without any indicators. The author has done a detailed study of trend structures, breakout patterns, pullbacks, and exhaustion points. The special thing is that this book is based on intraday charts and improves chart-based decision making in scalping or short-term trading. This book is like a guide to understand the internal dynamics of price movement.

6. Price Action Breakdown

This book focuses on price action in a simple and structured way. It teaches ways to identify basic chart structures such as support-resistance, swing highs-lows, and trendlines. The author emphasizes on explaining the psychological patterns of the charts, which helps in better prediction of reversal and continuation points. This book is useful for those traders who want to trade by understanding the price structure without indicators.

7. Trading Price Action Reversals

This book by Al Brooks provides a microscopic analysis of reversal patterns. It explains how a trend reversal can be identified in advance from the price action. Patterns like false breakouts, double tops-bottoms, wedge reversals are explained on real charts. This book is highly recommended especially for intraday and short-term traders who work on reversal-based entries. Logical approach and context-based analysis are its core strengths.

8. The Visual Guide to Chart Patterns

This book is the best option for a visual learner. In this, every chart pattern has been explained in a graphical manner, which makes recognition easy. Bulkowski presents dozens of chart patterns’ structure, breakout direction, failure signs, and performance stats through visuals. This is a user-friendly and practical guide for beginners and intermediate traders. An unmatched resource for visually understanding pattern-based decision making.

9. Candlestick Charting Explained

This book by Gregory Morris explains the concepts of candlestick charting in detail and step-by-step. Over 50 individual candlestick patterns and their combinations are thoroughly analyzed. The formation, significance, and reliability of each pattern are statistically validated. The book also contains numerous charts and historical examples, so that theoretical concepts can be easily applied practically. This book is highly useful for mastering candlestick techniques.

10. Chart Patterns

This book explains the identification, reliability, and application strategies of reversal and continuation patterns through case studies and charts. Kamich focuses on the institutional level charting approach, making it a solid resource for advanced traders. Matching fundamental concepts to charts improves the ability to perform real-time trading analysis.

What Makes a Great Chart Pattern Book?

Several key qualities distinguish an excellent chart pattern book as listed below, ensuring it is both informative and practical for traders at any level.

Clear explanation with practical charts : The best chart pattern book is considered to be the one that explains the pattern step-by-step through real charts. Visual clarity is more important than text.
Data and backtesting based analysis : Just identifying the pattern is not enough. A good chart patterns book must have data like historical performance, success/failure ratio. This gives you both confidence and direction in trading.
Easy and understandable illustrations : Good books explain even complex things with simple illustrations, so that even beginner traders can learn easily.
Information about false breakouts and failed patterns : A book that explains not only successful patterns, but also failed patterns and their signals is more reliable.
Matches your trading style : Every trader has a different style day trading, swing or positional. The right book is the one that gives you depth and context according to your need.

How to Choose the Right Chart Patterns Book for You

Every trader has different needs, so it is important to understand your skill level and trading style before choosing a chart pattern book. Below are some important points that will help you choose the right book:

Focus on visuals if you are a beginner : If you are a beginner, choose a book that has charts, examples and easy illustrations. This will help you quickly identify and understand patterns.
Data is important at the intermediate level : If you have some experience, then books that include success/failure rates of patterns, historical analysis and trading strategies will be better.
Advanced traders require in-depth knowledge : If you trade at the pro level, read books that cover topics such as context-based patterns, trading psychology and risk management.
Match your trading style : Whether it is day trading or swing trading, the book should match your strategy.

Conclusion

Understanding chart patterns in trading helps you make better decisions but it starts with a good book. Not every book is right for everyone, but when you choose according to your needs and experience, that book becomes the strongest source of learning. Any of the best chart pattern books mentioned above can point you in the right direction. Start, build understanding slowly and start applying it on real charts that is the real growth.

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Frequently Asked Questions (FAQs)

Which is the best chart pattern book for beginners?
Japanese Candlestick Charting Techniques is considered to be an excellent book for beginners.
Are chart pattern books still useful in 2026?
Yes, they are equally useful even today, especially for learning technical analysis.
Can I learn chart patterns without any trading background?
Even without a trading background, anyone can learn chart patterns by starting with the basics.
How long does it take to learn chart patterns?
If you practice daily, you can develop a good understanding in 1-2 months.
Do these books include real chart examples?
Yes, most books contain real charts and case studies.

August 11, 2025

Key Differences Between MTF and Loan Against Shares

There are times when you need money but don’t want to sell your shares. In such a situation, investors now have two easy and smart options to have access to funds: Margin Trading Facility (MTF) and Loan Against Shares (LAS). Both allow you to pledge your shares with your broker to borrow money, without having to sell your investments. Nowadays, both these facilities are becoming increasingly popular among retail investors in India.

In this blog, we will understand in detail what is the difference between MTF and LAS, when which option is better, along with their benefits and risks.

What is a Margin Trading Facility (MTF)?

Margin Trading Facility (MTF) is a facility that allows investors to buy shares of a higher value than the total amount they have. In this, you only have to deposit a fixed margin amount, and the rest of the amount is given to you by the brokerage firm as a loan. You can also consider it as the credit card of the stock market.

How does MTF work in India?

MTF service is being provided today by almost all the major brokers of India like Pocketful, Zerodha, Angel One, ICICI Direct, HDFC Securities, Groww etc.When you buy a share through MTF, those shares do not come to your demat account, but remain in pledged status. That is, until your entire loan is repaid, the shares you bought through MTF remain pledged.

How are shares pledged?

The brokerage firm pledges the shares purchased by you through the margin pledge system of NSDL or CDSL. If the stock price falls and the margin is reduced, you get a margin call meaning you either have to put up more money or the brokerage can sell your shares.

Interest Rate & Tenure

Brokerage companies usually charge 12% to 18% annual interest on MTF. The interest charges are calculated on a daily basis. However, some new digital platforms are now offering the facility at even lower rates. For example, Pocketful platform charges only 5.99% annual interest on MTF, which is currently the lowest in the market.

Check Out – Stocks Available for MTF

What is Loan Against Shares (LAS)?

Loan Against Shares (LAS) is a loan that you get by pledging your existing share holdings. You can think of it like a personal loan, where a bank or NBFC lends you a fixed amount based on your share value but without selling your shares.

How does LAS work?

When you take LAS, you have to pledge the shares in your demat account. The bank or finance company then lends a part of your total invested value (usually 50%–70%) as a loan. This entire process takes place under SEBI regulations and the shares remain in your name, only the bank has a lien on them.

Where is it used?

The biggest advantage of LAS is that this loan is for completely unrestricted use, that is, you can use this amount for business, education, medical expenses, or any personal need. It cannot be used for speculative activities and margin trading.

Interest Rate and Loan Tenure

The interest rates on LAS are usually between 9% and 12% per annum, which is lower than MTF. The loan tenure is also more flexible, sometimes it can be from 12 to 36 months.

Key Differences Between MTF and Loan Against Shares (LAS)

Parameter	Margin Trading Facility (MTF)	Loan Against Shares (LAS)
Purpose	To borrow funds for buying more stocks	To get cash by pledging your existing shares
Offered By	Stock brokers	Banks and NBFCs
Tenure	Short-term typically T+7 or T+30 days	Long-term usually 12 to 36 months
Interest Rate	Around 12%-18% annually	Around 9%-12% annually
Pledging	Shares bought via margin are pledged	Pre-owned shares are pledged
Usage of Funds	Only for buying more stocks	For any personal financial need

When Should You Use MTF?

Margin Trading Facility (MTF) is most useful for those investors who are active in the stock market and think of earning more profits in a short time. If you are confident about the short-term movement of a stock, and you are ready to take a little risk, then MTF can be a smart tool.

For which investors is MTF right?

Focus on short-term trading strategies
Have a high risk tolerance
Are skilled at spotting opportunities and can enter and exit trades quickly

Example : Suppose you have ₹50,000 and you want to buy shares worth ₹1,00,000. Through MTF, you can buy stocks up to twice your budget. If you expect a stock to rise by 10% in 5 days, then with this facility you can earn good returns even with less capital.

Use our Margin Trading Facility Calculator

When is LAS a Better Option?

Loan Against Shares (LAS) is a great option for investors who want to meet some cash needs without selling their long-term share portfolio. In this, you can take a loan by pledging your existing shares and that too without touching your investment.

Who is LAS better for?

Long term investors who do not want to sell their shares
Business owners who need funds for working capital
People who need emergency funds – like medical, children’s fees, or personal expenses
Low-risk investors

Example : Suppose you have shares worth ₹10 lakh in a demat account. You need ₹3 lakh for college fees. You can take LAS from the bank by pledging these shares without selling them and without affecting long-term returns.

Risk Factors to Watch Out For

Both MTF and LAS facilities are very useful for raising funds from the stock market, but they also carry some important risks, which are important to understand.

Risks associated with MTF:

If the stock price falls, there may be a forced square-off, i.e. the brokerage can sell your shares
The interest rate is high (up to 12–18%), which can increase the cost
Dependence on short-term market movement also leads to a higher timing risk

Risks associated with LAS:

If the value of the stock falls, the bank can make a margin call
If the entire portfolio is pledged in a downmarket, the loan-to-value ratio may deteriorate
If the interest or loan is not repaid on time, the bank can sell your shares.

Pocketful MTF vs LAS: Which is Better?

Pocketful MTF has an interest rate of just 5.99% per annum, while Loan Against Shares (LAS) from a bank or NBFC usually attracts an interest rate of 9% to 12%. While LAS takes 2 to 5 days to process, Pocketful MTF is activated within minutes and has very limited documentation.The loan amount in LAS can be used for any requirement, while Pocketful MTF is specifically designed for share trading allowing funds to be used directly for trading, allowing for more focused investing.

Conclusion

Both MTF and Loan Against Shares are effective ways to raise funds from the stock market, but their use depends on your needs and investment style. If you are active in the market and want to make quick profits, then MTF may be right for you. On the other hand, if you already have shares and want cash without selling them, then LAS will be more convenient. Before choosing any option, it is important to understand the interest rate, risk and loan terms thoroughly, so that a wise decision can be taken.

S.NO.	Check Out These Interesting Posts You Might Enjoy!
1	Margin Against Shares: How Does it Work?
2	Top Tips for Successful Margin Trading in India
3	Margin Pledge: Meaning, Risks, And Benefits
4	What is Intraday Margin Trading?
5	What is Operating Profit Margin?
6	Top 10 Highest Leverage Brokers in India – Maximize Profits with Margin Trading
7	Best Education Loan in India
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Frequently Asked Questions (FAQs)

What is the key difference between MTF and Loan Against Shares?
MTF is only for buying shares, whereas in LAS you can take cash for any need.
Can I use Loan Against Shares to buy stocks?
No, the money received from LAS cannot be used to buy shares.
What happens if share prices fall in MTF or LAS?
Margin calls can come in both and shares can be sold if needed.
Who should use MTF?
Traders who want to earn quick profits in the short term.
Who should prefer LAS?
Long term investors who need cash without selling shares.

August 11, 2025

What is Margin Funding?

A term that is becoming very popular among today’s smart traders is margin funding. If you’ve ever wondered how to build a large portfolio with limited capital, margin funding could be an excellent solution. In simple terms, it allows you to borrow funds from your broker, increasing your buying power and enabling you to take larger positions than your own capital would allow.

In this blog, we will talk about what is margin funding means, what is its role in trading, and its pros and cons in full detail.

Margin Funding Meaning Explained

Margin funding is a method through which you can make big investments with less capital. In simple words, your broker lends you money so that you can buy shares of higher value than your capital would usually allow. This funding increases your purchasing power.

Suppose you have ₹30,000 but you want to buy shares worth ₹1,00,000. In such a case, your broker will give you the remaining ₹70,000 in the form of margin trading funds. In return, a small interest will be charged from you and your shares will be kept as collateral.

This system is not like a personal loan because these funds can only be used for trading and your stocks you buy using it are kept as collateral. It can be called a kind of short-term trading credit which is given only to create trading positions in the market. Today many big brokers are providing this margin trade funding facility Calculator so that even small investors can make big trades; but it requires prudence and risk management.

Read Also: What is Stock Margin?

How Margin Trade Funding Works?

Margin Trading Funding works in the following ways:

Step 1: The investor invests his capital

At the beginning of the trade, you have to invest a part of the total investment amount yourself, which is called initial margin. This usually ranges from 25% to 50%, depending on the rules of the stock and the broker.

Step 2: The Broker funds the remaining amount

The remaining amount is given by your broker in the form of margin funding. This increases your buying power.

Step 3: Interest has to be paid on funding

You have to pay interest on this funding amount. Most brokers charge 12% to 18% per annum, but Pocketful is offering margin trade funding facility as offering margin trade funding facility at a very low interest rate, i.e. 5.99% per annum. This is beneficial for those traders who want to trade smartly at low cost.

Step 4: Shares are pledged

Your purchased shares are kept as collateral. If the market falls and the value of your portfolio goes below the set limit, the broker can make a margin call. If you do not deposit the required funds on time, your holdings can be sold.

Step 5: Profit or loss is calculated on the entire trade amount

Your profit or loss is calculated on the entire trade value, not just the amount you have invested. Therefore, margin funding increases the risk along with the benefits.

Understand with an example:

Details	Value (₹)
Total Trade Value	₹1,00,000
Your capital (55%)	₹55,000
Funding from broker (45%)	₹45,000
Interest rate (Pocketful)	5.99% p.a.
Profit/Loss Calculation	It will be for full ₹1,00,000

Key Terms You Must Know in Margin Funding

If you are thinking of starting trading using margin funding, then it is very important to understand some basic terms. These terms will not only improve your understanding of margin trading, but will also help you in risk management. Let’s understand them one by one in simple language:

Margin : Margin is the amount that you have to invest yourself to begin margin trading. It is also called initial margin or upfront margin. It is usually 25%-50% of the total trade value.
Leverage : Leverage means trading more value with less capital. Through margin funding, you can increase your purchasing power by taking a loan from the broker. The higher the leverage, the higher the risk and return.
Interest Rate : The interest on money you take from the broker as funding is charged a fixed interest rate. This rate may vary depending on the broker. For example, Pocketful charges just 5.99% per annum, while other brokers may charge up to 12%-18%.
Pledge/Collateral : When you take margin funding, the shares purchased using the broker funds are pledged. That is, these shares remain pledged with the broker until you sell and repay the funding amount.
Margin Shortfall : When the value of your portfolio falls below the minimum required margin, it is called margin shortfall. In this situation, the broker may ask you to deposit additional funds, which is called a margin call.

Liquidation : If you do not deposit additional funds on time, the broker may sell your shares. This is called forced liquidation.

Before starting trading,it is important to understand all these terms properly because even a small mistake can cause a big loss. Use Margin funding only when you understand all its aspects.

SEBI Regulations Around Margin Funding in India

Margin Funding or Margin Trading Facility i.e. MTF allows investors to buy more shares with less capital. SEBI has laid down strict and clear rules regarding this facility so that investors remain safe and the entire system remains transparent. Below, all the main aspects related to this facility are explained in detail.

Eligible shares and securities : SEBI has declared only Group-I stocks and certain equity ETFs are eligible for MTF. Margin on these stocks is determined on the basis of Value at Risk (VaR) and Expected Loss Margin (ELM). The margin amount is calculated as VaR + 3 * ELM for F&O stocks and VaR + 5 * ELM for non F&O stocks.
Initial margin required : Client is required to provide minimum initial margin in the form of cash or eligible securities to avail MTF. If the value of the portfolio falls below the prescribed limit, the broker can make a margin call and recover by selling the client’s holdings if needed.
Limited sources of funding : Brokers can raise capital for MTFs from only four authorized sources: own capital, bank/NBFC loans, unsecured loans from promoters or directors, and regulatory approved commercial papers.
Safe holding of shares : Shares purchased using MTF are held in a separate Demat account and the entire process of Pledge/Re-pledge is done electronically as per SEBI regulations.
Daily reporting mandatory : At the end of every trading day, the broker has to send details of all MTF positions and exposures to the exchange by 6 pm, thereby maintaining transparency.

These rules made by SEBI are not only to protect the investor but are also necessary to keep the entire stock market system stable and transparent. MTF is a great facility but it is beneficial only when both the investor and the broker follow the guidelines of SEBI completely.

Pros and Cons of Margin Trading Funding

Pros of Margin Trading Funding

Increased investment capacity : The biggest feature of MTF is that it gives you the power to buy more shares than your capital would allow. For example, if you have ₹1 lakh, you can take a position of up to ₹3-4 lakh.
Significant Profits in the short term : For active traders, MTF can help in earning quick profits, because by taking big positions for a short time, one can benefit even from small price movements.
Better fund utilization: With Margin Trading Funding (MTF), you can free up your cash for other investments while still gaining greater market exposure, even with a smaller upfront amount.
Funds are available for long term also : Earlier MTF was used only for short term trading, but now some brokers are providing funding for up to 365 days.

Cons of Margin Trading Funding

Risk of huge losses : If the market goes against your trading positions, the losses can be much more than your investment amount, because you are trading on credit.
Interest Charges: The broker charges interest on MTF. This interest can reduce your profits, especially when your trading positions are not very profitable.
Margin call and force selling : If the price of stocks falls below a certain limit, the broker can make a margin call. If you do not deposit the required funds on time, your holdings can be sold by the broker.
Overtrading : Leverage often encourages investors to trade more than necessary, which can result in significant losses over the long term.

How to Apply for Margin Funding Facility with Your Broker?

To start margin trading funding, you have to follow some easy steps. This process is completed online on most broker platforms and can be activated in a few minutes.

Open a Demat and trading account : To avail MTF, first you have to open a Demat + Trading account with a broker that provides margin trading facility.
Submit the required documents : Documents like KYC, PAN, Aadhaar, income proof have to be submitted. These brokers decide the funding limit based on your income and risk profile.
Accept the risk disclosure : Margin trading involves high risk, so it is important to read and agree to the Risk Disclosure Document provided by the broker.
Activate the Margin Pledge system : Under the new rules of SEBI, you have to activate Demat Debit and Pledge Instruction (DDPI) before using MTF. You can complete this process online from your trading platform.
Start Trading: After completing all the above steps, you can start trading using the margin funds.

How to get MTF with Pocketful?

If you are looking for easy, transparent and affordable margin trading, Pocketful is a great option for you. On Pocketful:

You get MTF through Pocketful’s “Pay Later” feature, starting at just 5.99% per annum, the lowest in the industry.
The funding period is for 365 days, allowing you to hold your trading positions for a longer time.
The entire process is 100% digital and fast.

Check Out – Stocks Available for MTF

Conclusion

Margin Trading Funding (MTF) is a great way to trade more with less capital, but the risk is also significant. When combined with proper risk management and thorough research, margin funding can potentially enhance your returns. In today’s digital age, platforms like Pocketful are offering margin funding through its “Pay Later” feature in an easy, transparent and affordable way. But before making any trading decision, it is important to consult a financial advisor.

S.NO.	Check Out These Interesting Posts You Might Enjoy!
1	Margin Against Shares: How Does it Work?
2	Top Tips for Successful Margin Trading in India
3	Margin Pledge: Meaning, Risks, And Benefits
4	What is Intraday Margin Trading?
5	What is Operating Profit Margin?
6	Top 10 Highest Leverage Brokers in India – Maximize Profits with Margin Trading
7	Lowest MTF Interest Rate Brokers in India \| Top 10 MTF Trading Apps

Frequently Asked Questions (FAQs)

What is Margin Trading Facility in trading?
Margin Trading Facility or MTF allows you to buy more shares with less money by using funds provided by the broker.
Is margin trading risky?
Yes, there is more risk in it because the losses can be significant if the market value of your investment decreases.
Can beginners use MTF?
Beginners should first understand the basics and gain market experience before using MTF.
How much interest does Pocketful charge on MTF?
Pocketful’s MTF interest rate starts at just 5.99% annually, which is the lowest in the industry.
Can I apply for MTF online?
Yes, you can activate MTF online on most brokers platforms.

August 3, 2025

10 Best Price Action Trading Books

When it comes to the markets, there are two primary approaches: technical analysis and fundamental analysis. While fundamental analysis focuses on evaluating the intrinsic value of an asset, technical analysis studies price movements through charts and patterns. Among various technical approaches, price action stands out for its simplicity and effectiveness, as it emphasizes understanding raw price movements without relying on complex indicators.

In this blog, we will give you an overview of the top 10 best price action trading books.

What is Price Action?

Price action is a study of price movements of a stock plotted over time, and traders make decisions based on these historical price movements. The traders who trade based on the price action focus more on chart patterns, candlesticks, trendlines, support and resistance, etc. Traders and analysts who use price action examine key elements such as:

Chart patterns (like triangles, flags, or head-and-shoulders) to predict potential market direction.
Candlestick formations, which provide insight into market psychology (e.g., bullish/bearish reversals).
Trendlines, which help identify whether the market is trending upward, downward, or moving sideways.
Support and resistance levels, which indicate where the price is likely to pause, reverse, or break out.

By interpreting these, traders get an idea about the market sentiment directly from price movements.

10 Best Price Action Trading Books

Book Title	Author	Year	Goodreads Rating
Martin Pring on Price Patterns	Martin J. Pring	2004	4.14
A Complete Guide to Volume Price Analysis	Anna Coulling	2013	4.24
Forex Price Action and Scalping	Bob Volman	2011	4.13
The Market Wizards	Jack D. Schwager	1989	4.25
Japanese Candlestick Charting Techniques	Steve Nison	1991	4.31
Trading Price Action Trends	Al Brooks	2011	4.06
The Art and Science of Technical Analysis	Adam Grimes	2012	4.23
Encyclopedia of Chart Patterns	Thomas Bulkowski	2000/05	4.09
The Ultimate Trading Guide	John R. Hill	2000	3.25
Price Action Breakdown	Laurentiu Damir	2015	4.2

Overview of Best Price Action Trading Books

An overview of the best price action trading books is given below:

1. Martin Pring on Price Patterns

This book was written by Martin J. Pring in 2004. It is a comprehensive guide that explains the steps to use price patterns, such as head and shoulders, triangles, etc. Pring was a renowned technical analyst, and with his extensive experience, he wrote this book, which has helped many traders. In his book, he has covered all the relevant topics such as support and resistance, trendlines, etc. Martin Pring explains the formation of these patterns and the method to use them effectively.

What will you learn?

A trader will learn to identify and analyse different patterns like double top, head and shoulder, etc.
Entry and exit points based on the patterns.
Combining the price with the volume and moving average.
Reliability of patterns and failure indicators.

2. A Complete Guide to Volume Price Analysis

This book was written by Anna Coulling and was published in 2013. This book explains the concept of volume price analysis, which combines the volume and price movement of a stock to identify its strength of bullish or bearish market moves. This book helps a trader in identifying false breakouts and improving their decision-making. It offers the trader a practical way to understand the market moves without relying on indicators.

What will you learn?

How the market moves can be predicted using price and volume.
Using volume signals to identify buying and selling pressure.
Using volume confirmation to identify a false breakout.
Understanding the various phases of the market, such as accumulation and distribution.

3. Forex Price Action and Scalping

The book was published in 2011 and was written by Bob Volman. This book is suitable for traders who are interested in manual scalping and want to do scalping in a short time frame. They are preferred by the traders who generally trade in the currency segment. However, the book also focuses on proper risk management.

What will you learn?

Techniques for scalping based only on price movement.
How to take a trade based on a 5-minute chart pattern.
Real chart pattern examples along with a detailed explanation of it.
Strategies for fast entry and exit in forex trades.

4. The Market Wizards

The author of the book was Jack D. Schwager, and the book was first published in 1989. This book details the in-depth interviews of the most successful traders of that time. Those traders made their fortune in different market segments, including stocks, forex, commodities, etc. The major takeaways of the book are risk management, patience and discipline. The book is in conversational form. All traders seek inspiration from this book.

What will you learn?

Perspective of successful traders.
The psychological traits required for trading price action.
Risk management techniques.
How to modify their trading strategies based on changing market dynamics.

5. Japanese Candlestick Charting Techniques

The book was first published in 1991 and was primarily focused on the usage of candlestick patterns in the modern trading world. The author of the book is Steve Nison. This book can be a foundation for traders who want to learn the art of candlestick patterns and how they can reveal market segments. This book navigates a trader from basic to advanced usage of chart patterns. It covers numerous candlestick patterns and how to combine them with other technical tools.

What will you learn?

The evolution and importance of the candlestick pattern.
How to use a candlestick pattern along with other technical tools.
Understanding the psychology of the market, which influences candlestick formation.
Detailed explanation of reversal and continuation patterns with examples.

6. Trading Price Action Trends

This series of books was first published in 2011 and was written by AL Brooks. This book is not suitable for beginners, as it is highly technical. The techniques presented in this book are applicable across all time frames. The book is based on identifying the trading ranges and their breakouts and helps a trader in finding out the false breakouts. This book presents a systematic and detailed approach to analysing every candlestick pattern.

What will you learn?

One to five-minute charts are used for analysis of small price action.
Recognising patterns, breakouts and reversals.
Deep analysis of price structure, without studying volume.
Calculating the support and resistance levels

7. The Art and Science of Technical Analysis

The book “The Art and Science of Technical Analysis” was written by Adam Grimes and was published in 2012. The book primarily focused on a data-driven approach to studying technical analysis and price action. The author was a successful trader and has traded for various proprietary firms, hedge funds, etc. The book stresses the importance of stop loss and target. Adam Grimes explains what works in the market and what does not, and the importance of removing guesswork from the price analysis.

What will you learn?

The reason behind the changes in market price.
Recognition of pattern by statistical analysis.
Duration of the effectiveness of the price trend.
Practical and realistic trading strategies.

8. Encyclopedia of Chart Patterns

This book was first written and published in 2000, and in 2005, its second edition was published. The book focuses on statistical and visual examples of chart patterns. In this book, almost every trading chart pattern is included. This book is generally used by swing and positional traders. This visual book is suitable for traders who wish to understand the real reasons behind every pattern. The writer of the book, Thomas Bulkowsky, shows the success and failure rate, and the average returns of different candlestick formations.

What will you learn?

Failure and success rate of the candlestick pattern.
How to trade and handle trades based on each pattern.
Finding rare and potential formations.
A comprehensive collection of performance statistics and chart patterns.

9. The Ultimate Trading Guide

This book was written by John R. Hill and was published in 2000. The book combines the trend-following strategy and technical analysis, followed by effective money management strategies. The book teaches traders to build their strategies using effective techniques. It introduces the method to develop, test and trade complex and structured strategies considering the price behaviour of the market.

What will you learn?

How to use quantitative price action techniques.
Establishing and evaluating a trading system.
Understanding both the psychological and technical aspects of trading.
Analysing the chart to understand the entry and exit points.

10. Price Action Breakdown

Price Action Breakdown was written by Laurentiu Damir and was published in 2015. In this book, the author focuses on a simplified and practical approach to trading based on price action. The book primarily focuses on the foreign exchange (forex) market and introduces an approach that emphasizes the analysis of market movement, structure, and the psychology behind it. The book explains how to identify important levels and execute trade setups based on it.

What will you learn?

Basic price action concepts made easy for beginners.
Key strategies using important price levels.
How to analyse support and resistance levels, trends, etc.

Conclusion

On a concluding note, various traders have shared their experiences and successful strategies in different books written by them. Those price action trading books help new traders in refining their strategies without relying on too many indicators. No matter whether you are an experienced or a novice trader, these books help you in building a strong foundation, and by reading them, you can create a trading strategy that suits your trading style. However, it is advised to consult your investment advisor before executing any trades.

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Frequently Asked Questions (FAQs)

What is the meaning of price action trading?
Price action trading is an approach that involves analyzing and making decisions based on historical price movements, often using candlestick patterns, chart structures, and key price levels.
Can I start trading by reading the best price action trading books?
Yes, one can learn the art of price action trading by reading the best price action trading books. However, it is advisable to consider your risk profile, trade by keeping a stop-loss and only after consulting your investment advisor.
Is price action trading useful only in forex trades?
No, price action trading is effective in different market segments such as equity, commodities, forex, etc.
What are some of the best price action trading books?
The best price action trading books are Martin Pring’s on Price Patterns, A Complete Guide to Volume Price Analysis, Price Action Breakdown, etc.
What is scalping?
Scalping is a trading approach in which the trader quickly takes entry and exits from trading positions in large quantities and tries to take advantage of small price movements.

August 2, 2025

Margin Against Shares: How Does it Work?

Have you ever wanted to trade but didn’t have enough cash on hand while holding stocks you believe will perform well and don’t want to sell? This is where Margin Against Shares (MAS) comes in. It’s a popular and highly effective facility that allows you to borrow funds by pledging the shares you already own, giving you the liquidity to trade without having to sell your investments.

We’ll explain the concept of Margin Against Shares (MAS) in an easy-to-understand way with an example. Moreover, we will discuss its advantages and disadvantages.

Understanding Margin Against Shares

Consider it this way – You have shares in your demat account. When you need more money to trade, you can pledge these shares to your broker rather than selling them. You receive a certain amount of money (also referred to as “pledged margin”) in exchange, which you can use to trade more stocks or derivative contracts.

How Does it Work?

Usually, it goes like this:

You have shares in your demat account.
You request that your broker pledge those shares.
After evaluating their eligibility, the broker informs you of the margin you will receive, which is normally between 50% and 80% of the total value.
That sum is credited to your trading account as pledged margin.
Now you can trade with it.
You can unpledge your shares if you no longer need margin to trade.

Example: Suppose you own ₹1,00,000 worth of ABC stock. Your broker gives you a ₹60,000 margin (at 60%) after you pledge it. You can now trade with more purchasing power without having to sell your shares or transfer additional funds.

Benefits/Risks of Margin Against Shares

Benefits

1. You Are Not Required to Sell Your Stocks

You want to trade but do not want to part with your long-term holdings? Instead of selling your shares, MAS allows you to borrow against them.

2. Easy Access to Money

All you have to do is pledge your shares to access funds, which can sometimes be fulfilled within a matter of hours.

3. Increased Profit Potential

Your money stays invested in your shares while also being used as collateral for trading, allowing you to maximize the potential of your capital.

4. Do With It As You See Fit

You may use the pledged margin to trade F&O or additional stocks on an intraday basis.

5. The shares are still yours.

You still receive dividends, bonuses, and other benefits even though your shares are pledged.

Risks

1. Markets May Be Volatile

Your margin limit also decreases if the value of the shares you pledged declines, and your broker may request that you deposit additional money or pledge additional securities.

2. Your Shares May Be Sold

Your broker may sell your pledged shares or square off your trades to make up the difference if you don’t fulfill margin requirements promptly.

3. Interest Charges May Increase

It is not always free to use the margin. Trading in F&O contracts may attract interest charges if the cash component of the margin requirement is funded by your broker.

4. Not Every Stock Is Permitted

Not all shares are allowed for availing margin against shares. You can only pledge shares that are approved by your broker and permitted by regulatory authorities.

5. Significant Losses

You could be tempted to trade more than you should if you have additional money. Additionally, overtrading in the market can quickly result in significant losses.

Read Also: What is Stock Margin?

Conclusion

If you wish to do trading without depositing additional funds and selling your favourite stocks, using margin against shares is a wise choice. It is efficient, enhances profit potential, but also involves risks. Therefore, if you want to use it, start small, stay informed, and never trade beyond your comfort level. When used properly, MAS can be an effective tool for increasing your profits without affecting your long-term investments.

S.NO.	Check Out These Interesting Posts You Might Enjoy!
1	What is Pledging of Shares?
2	Top Tips for Successful Margin Trading in India
3	Features and Benefits of Demat Account
4	Smart Beta Funds: Characteristics, Factors, Benefits, and Limitations
5	Different Types of Trading in the Stock Market
6	Lowest MTF Interest Rate Brokers in India

Frequently Asked Questions (FAQs)

Is it possible for me to sell pledged shares at any time?
No, you must first unpledge them.
What would happen if stock prices fell?
A margin call to transfer additional funds or pledge additional securities might be sent to you by your broker.
After pledging, how long does it take to receive the margin?
Usually within one working day, you get access to margin funds.
Is it possible to use a joint account for this?
Yes, but it might require approval from both account holders.
Is this something that all brokers provide?
Check with your broker; the majority of full-service and discount brokers currently offer this facility.

August 1, 2025

How to Use AI for Stock Trading?

Have you ever thought about whether you could trade stocks like Wall Street experts using artificial intelligence (AI)? AI is increasingly being used in the world of investing, and it’s no longer limited to large institutions or tech experts.

Nowadays, anyone can use AI tools to predict stock prices, automate strategies, track market trends, and improve their trading decisions. You do not have to be a software developer or data scientist to get started. In this guide, we’ll explain what AI trading is, how it works, and how you can start using it.

What is AI Trading?

Consider artificial intelligence (AI) as a very intelligent assistant that can analyse extensive volumes of data, such as historical stock prices, news headlines, social media noise, and identify trends that could help you predict a stock’s future price movements.

AI can assist with trading in the following ways:

Recognising patterns and forecasting prices
Examining sentiment in tweets and news
Automated trade execution
Rebalancing portfolio
Managing risk

Evolution of AI in Stock Trading

Trading stocks has advanced significantly. In the past, it was all about being intuitive and the people you knew. These days, computers can read news articles, analyse tweets, and make trades more quickly than a human could.

How did we get here, then? Let us take a quick look back at how artificial intelligence (AI) gradually but steadily entered the stock market.

Before 1980s

Imagine traders yelling across the floor, phones ringing nonstop, and stock prices scrawled on notepads. There were no advanced models or fast computers, so people relied on their experience, intuition, and the morning paper while making decisions. Everything was manual, emotional, and, well, a little chaotic.

1980-90s

With the introduction of personal computers, things began to change. To test strategies, traders started using spreadsheets and basic formulas. It was the first time that people could analyse actual data before making a trade, but it wasn’t AI. This period created the foundation for “quantitative trading,” in which reason and statistics began to take first place over intuition.

Early 1990s

The 1990s saw a boom in trading. High-frequency trading, or HFT, began when computers began to make thousands of tiny trades per second.

This was not AI. It was more like automatic, lightning-fast math. Nonetheless, it suggested a major shift from human-driven to rule-based automation.

Late 1990s

Things started to get fascinating at this point. Traders started feeding previous market data into algorithms that could learn and get better over time as machine learning gained popularity. Traders started allowing computers to make decisions on their own instead of following only predefined instructions. This strategy was used by prominent hedge funds like Renaissance Technologies, which are extremely successful and secretive, and quietly control the markets.

Early 2010

We were all overwhelmed by information in the 2010s. At that point, AI advanced further by learning to read and comprehend human language. In a shorter period than it would take a human to read the article, tools that use natural language processing (NLP) could determine whether the sentiment surrounding a stock was positive or negative and take appropriate action.

With robo-advisors and app-based tools suggesting portfolios based on individual goals and risk tolerance, retail investors also began to benefit.

Fast Forward to Now

AI is more intelligent, faster and widely available than before. Deep learning models can forecast stock price trends by identifying patterns that humans might miss. Large language models are useful for writing trading strategies, carrying out market research, and even coding.

How AI Trading Works?

A basic framework of how AI trading works is given below:

1. Identifying Trends and Formulating Forecasts: It is possible to train AI tools, particularly those that employ machine learning, to identify patterns in past stock data. They improve their ability to forecast the possible behaviour of particular stocks over time. Imagine it as a more advanced form of technical analysis, only faster and more accurate.

2. Sentiment Analysis: Artificial intelligence (AI) systems can search the internet for anything, including news articles, financial reports, Reddit posts, and tweets. They can very quickly ascertain whether the general sentiment regarding a particular stock or industry is favourable or unfavourable. This is referred to as sentiment analysis, and it can help you in anticipating the market’s reaction.

3. Trading Automatically Using Predetermined Rules: When trades are carried out automatically in response to a set of instructions, this is known as algorithmic trading, or algo trading. These rules can now be adjusted in response to real-time data when AI is added. A bot can buy or sell for you depending on the state of the market.

4. Optimising Your Portfolio: Artificial intelligence (AI) tools can analyze your investments and make recommendations for strategies to lower risk or increase returns. They perform this by examining the movement of various assets and determining the best combination depending on your objectives.

5. Recognizing Risks: By identifying unusual activity, abrupt volatility, etc. AI can even help you avoid mistakes, thereby helping you manage risk.

Steps to do AI Trading

1. Learn Key AI Concepts: Before you start working with artificial intelligence (AI), learn the basics, including how it can recognise patterns, predict trends, assess the sentiment of news, and automate trades. You don’t have to be a tech expert to understand the problems AI helps to solve in the trading industry.

2. Pick suitable AI Tools: Choose tools based on your goals and skill level. Professionals might look into QuantConnect, while beginners can begin with no-code platforms. Verify that the tool supports automation, real-time data, and backtesting.

3. Build your AI Trading System: After selecting a platform, create a trading strategy. Before going live, analyze historical data, establish risk limits, set entry and exit rules, and execute backtests to observe how your AI system performs in various market scenarios.

4. Use AI Features Effectively: Make use of AI tools for price prediction, pattern recognition, sentiment analysis, and portfolio optimisation. For example, some AI models can alert you when a stock is overbought or automatically adjust your holdings in response to market volatility.

5. Combine AI with Human Oversight: AI is not perfect, so don’t rely solely on it. Watch your system closely and be prepared to take over control over trading when necessary. Combining market experience with AI’s speed yields the best results.

Read Also: Benefits of AI in the Stock Market

Conclusion

AI has significantly changed stock trading, evolving from human-driven decisions to systems that can learn, adapt, and even outperform experienced traders. This journey is still unfolding, making it an exciting time for both beginners and seasoned investors to explore how AI can enhance their trading strategies. It is advised to consult a financial advisor before trading.

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3	Can AI Predict the Stock Market?
4	How AI and Machine Learning Are Transforming Trading Strategies?
5	Stock Market Prediction Using Machine Learning in 2025
6	Scope of AI in Investing: Usage, Benefits, and Challenges

Frequently Asked Questions (FAQs)

Does using AI for trading require coding knowledge?
No, not always! Without writing a single line of code, you can create AI-powered strategies with the help of no-code platforms.
Is it possible for AI to forecast stock prices?
Although no model is 100% accurate, AI can predict trends based on historical data. It is not a crystal ball, but a tool.
Is AI trading meant for experts?
Not at all! Even novices can use AI to automate processes or do more intelligent data analysis with today’s tools.
Describe backtesting and explain its significance.
Backtesting is the process of evaluating your approach using historical data to determine how well it would have worked. It keeps unpleasant surprises at bay.
Is it possible for AI to eliminate trading risk?
No. Although markets are unpredictable, AI can improve risk management. Always keep an eye on your plan and make necessary adjustments.

August 1, 2025

Difference between Margin Trading and Leverage Trading

Leverage and margin trading are the two popular trading strategies used by traders to enhance their returns. These approaches make it possible to take larger positions than what one’s own funds would normally allow. However, it is necessary to understand the risk and difference between margin trading and leverage trading to use them effectively.

In this blog, we will explain to you the key differences between leverage and margin trading.

What is Margin Trading?

Margin trading allows you to buy assets by borrowing funds from your stockbroker, enabling you to take larger positions than your available capital would otherwise permit. This can be done in two main ways:

Pledged Margin – By pledging the shares you already hold in your demat account, you can unlock their value and use it as collateral to trade in your chosen assets. The pledged margin is always less than the current market value of the pledged securities.
Margin Trading Facility (MTF) – Brokers also provide a facility where you can borrow additional funds directly to purchase stocks, often beyond the value of your holdings.

Check Out – Stocks Available for MTF

In exchange for providing MTF, brokers charge interest, which can range from 5.99% to 18% annually, depending on the broker. For instance, Pocketful offers one of the lowest interest rates in the market at just 5.99%. Interest accrues until the borrowed amount is fully repaid. Additionally, pledging charges may also apply when you use your existing shares as collateral.

Use our Margin Trading Facility Calculator

The key features of margin trading are as follows:

Features of Margin Trading

Initial Margin: A trader is required to deposit an initial margin before executing a trade using MTF. When using pledged margin, no additional cash margin is required upfront, as the pledged shares serve as collateral.
Margin Call: In MTF, the broker issues a margin call, requesting additional funds, if the funds in the trading account drops below the minimum maintenance margin due to market movements against your trading position. In pledged margin, if your losses exceed the pledged margin, the broker can sell your holding to cover your losses.
Selected Securities: Not all stocks are eligible for margin trading. The list of securities that are allowed for margin trading is usually provided by brokers.

What is Leverage Trading?

Leverage is a feature that allows you to enter large positions by depositing a small amount of the entire trade value as a margin, and the remaining amount is paid by your broker. Generally, leverage is expressed in terms of multiples such as 5x or 10x. Leverage offered by a company depends on various factors, such as the market segment in which you are trading, such as cash, and derivatives segments.

Features of Leverage Trading

The key features of leverage trading are as follows:

Increased Market Exposure: Leverage trading increases both profits and losses by allowing traders to create large trading positions with small capital.
Multiple Segments: Leverage trading provides flexibility across various market segments, such as stocks, forex, commodities, derivatives, etc.
Short-term Trades: Leverage trading is typically used by traders to earn profit from short-term price movements, generally intraday.

Key Differences Between Margin Trading and Leverage Trading

Particular	Margin Trading	Leverage Trading
Source of Funds	Involves borrowing funds from the broker either by: • Pledging Margin – Using existing shares in your demat account as collateral. • Margin Trading Facility (MTF) – Borrowing additional funds from the broker to buy stocks.	Brokers provide extra capital (leverage) to take larger positions without requiring pledging of securities.
Ownership of Assets	You purchase and hold the shares in your account using the borrowed funds.	You typically do not own the underlying asset as leverage is usually available on derivative instruments or on an intraday basis.
Interest Charges	Brokers charge interest on the borrowed amount using MTF (usually between 5.99% – 18% annually). Pledging charges may also apply to avail pledged margin.	Leverage trading attracts no interest.
Collateral Requirement	Requires collateral ,i.e. your pledged shares for availing pledged margin. In MTF, shares purchased are pledged after purchase.	Usually does not require pledging; only margin deposit is needed as security.
Risk Level	Lower relative to high-leverage trading since it is backed by pledged securities and regulated borrowing limits.	Higher risk due to the ability to open much larger positions than your actual capital.
Purpose	Primarily used for long-term share purchases with additional funds.	Often used for short-term speculative trades in derivatives, forex, or commodities.

Benefits of Leverage and Margin Trading

The key benefits of leverage and margin trading are as follows:

Increased Purchasing Power: With leverage and margin trading, traders are able to execute larger positions than they could with their funds. This increases their capacity to take advantage of market opportunities without having to pay the entire amount upfront.
Higher Profits: Even slight price changes may provide significantly higher returns than unleveraged positions.
Opportunities in Any Market Direction – Whether the market is rising or falling, traders can capitalize on both bullish and bearish trends using various setups such as futures contracts, options, or margin-based short-selling.

Risk Involved in Leverage and Margin Trading

The various risks involved in leverage and margin trading are as follows:

Increased Loss: Losses can also increase exponentially if there is an unfavourable price movement in the stock price.
Margin Call: The broker may issue a margin call if a trader’s account value drops below the necessary margin limit. To meet the margin requirement, the trader must either liquidate their current positions or make additional deposits.
Auto Square Off: If the price falls below a certain level and the trader fails to deposit the additional margin required, then the broker can square off the position.

Conclusion

Both leverage and margin trading can significantly boost profits but also increase risk exposure. While margin trading involves borrowing against existing assets or availing a margin facility (MTF) for long-term share purchases, leverage trading is typically used for short-term speculative positions. Understanding these differences and applying sound risk management strategies — such as using stop-loss orders and avoiding over-leveraging — is crucial. Always consult with a financial advisor before using these trading approaches.

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4	Swing Trading vs Day Trading: Which Strategy Is Right For You?
5	Different Types of Charges in Online Trading

Frequently Asked Questions (FAQs)

Is there any difference between margin trading and leverage trading?
Yes, both margin and leverage trading differ from each other as margin trading is a trading approach in which a trader borrows money from the broker by pledging their shares or takes a loan from the broker and pays interest against it. While in leverage trading, a trader deposits a small amount and borrows the remaining funds to increase their position over and above the capital deposited by them, usually to trade on an intraday basis.
Do I need to have a special account for margin trading?
No, you do not need a separate account to trade using margin trading facility (MTF).
What is a margin call?
A margin call is when your broker requests that you sell some of your shares or make additional deposits into your margin account in order to comply with the necessary maintenance margin level. This occurs when your leveraged position’s value significantly falls.
Is there any difference between MTF and Margin Trading Facility?
MTF is simply the acronym for Margin Trading Facility.
How to manage the risk involved in leverage and margin trading?
To manage risk, one must use stop-loss, avoid over-leveraging, and monitor their positions closely.

August 1, 2025

Category: Trading

What is a Call Option?

What are ITM, ATM and OTM in Call Option?

In The Money (ITM) – Call Option

At The Money (ATM) – Call Option

Out of The Money (OTM) – Call Option

What is a Put Option?

What are ITM, ATM and OTM in Put Option?

In The Money (ITM) – Put Option

At The Money (ATM) – Put Option

Out of The Money (OTM) – Put Option

Difference Between ITM, ATM and OTM Options

Common Mistakes Traders Make in Understanding ITM, ATM, and OTM

Conclusion

Frequently Asked Questions (FAQs)

What is the full form of ITM, ATM and OTM?

How to know if an option is ITM, ATM or OTM?

Which option is safer to buy?

Why is ATM option premium higher than OTM options?

Can OTM become ITM before expiry?

What is the Margin in Trading?

What is SPAN Margin?

What is Exposure Margin?

Difference Between SPAN Margin & Exposure Margin

Why is Margin & SPAN Important for Traders?

1. They Help You Manage Risk

2. Efficient Use of Capital

3. Adhering to SEBI Regulations

4. Maintaining Flexibility in Real Time

Conclusion

Frequently Asked Questions (FAQs)

For what reason do I require both margins?

Do these margins fluctuate daily?

Who determines the amount of margin I require?

What happens if my account doesn’t have enough margin?

Is it possible to lower the SPAN margin that I must pay?

AI in Action: Transforming the Stock Market

Features of AI in the Stock Market

Use cases of AI in the Stock Market

Benefits of Using AI in the Stock Market

Risk of Using AI in the Stock Market

Conclusion

Frequently Asked Questions (FAQs)

Can a retail investor use AI tools?

What are the risks involved in using AI tools in the stock market?

Is it legal to use AI in the Indian stock market?

How does AI predict the stock price movement?

Can AI analyse news related to a particular stock?

Top 10 Best Chart Patterns Books for Traders (2026 List)

Brief Overview of the Chart Patterns Books

1. Encyclopedia of Chart Patterns

2. Technical Analysis Using Multiple Timeframes

3. Trading Classic Chart Patterns

4. Japanese Candlestick Charting Techniques

5. Trading Price Action Trends

6. Price Action Breakdown

7. Trading Price Action Reversals

8. The Visual Guide to Chart Patterns

9. Candlestick Charting Explained

10. Chart Patterns

What Makes a Great Chart Pattern Book?

How to Choose the Right Chart Patterns Book for You

Conclusion

Frequently Asked Questions (FAQs)

Which is the best chart pattern book for beginners?

Are chart pattern books still useful in 2026?

Can I learn chart patterns without any trading background?

How long does it take to learn chart patterns?

Do these books include real chart examples?

What is a Margin Trading Facility (MTF)?

How does MTF work in India?

How are shares pledged?

Interest Rate & Tenure

What is Loan Against Shares (LAS)?

How does LAS work?

Where is it used?

Interest Rate and Loan Tenure

Key Differences Between MTF and Loan Against Shares (LAS)

When Should You Use MTF?

For which investors is MTF right?