Explain the terms -selling short and Margin Trading

Selling a stock when the price is high and buying when the price drops down is called short selling. Here you buy or sell a stock which practically doesn’t belong to you. Whenever a short selling is done you need to place an MIS (Margin Intraday Settlement) order. However, short selling needs to be covered within the same day, i.e., intraday settlement.

When an investor wants to buy more stock than what they can afford, then end up borrowing funds from a broker to purchase a stock. This practice is called margin trading. Margin money increases the purchasing power of the investor. The broker lends money on interest and keeps the share as the collateral. There are two types of margin trading: intraday and delivery.

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