What should you check before using MTF?
Know your all-in cost, set a rupee limit, keep spare cash for a margin call, and decide where you’ll sell before you buy.
The short version
| I know my all-in cost in rupees | Yes / No |
|---|---|
| I know where I’ll sell if I’m wrong | Yes / No |
| I have spare cash for a margin call | Yes / No |
| I can afford to lose this money | Yes / No |
| Any “No” means wait |
This is a way of thinking it through, not investment advice.
What should you check before you buy?
Your all-in cost, the rise you need to break even, and where you will sell if you’re wrong.
- I know the all-in rupee cost for my amount and days (work it out).
- I know how far the share must rise to cover it (see how).
- I have decided the price at which I will sell if I’m wrong.
- I know how long I plan to hold, in days or weeks.
- I’m not adding to a stock only because it has fallen.
How much should you use?
Set a rupee limit in advance and don’t raise it during a trade. How much is your decision, and there’s no official number.
A rule of thumb you’ll see among traders is to keep borrowed money under about 10% of what you own. On ₹5,00,000 of investments, that is ₹50,000. It isn’t a rule from SEBI or the exchanges, and it may be too much for you.
Are you ready for a margin call?
You should know what your broker does, have spare cash set aside, and already know whether you would add money or sell.
- I know how my broker tells me about a margin call and how long I get.
- I have cash set aside that I don’t need for anything else.
- I can tell someone how far the price can fall before a call (work it out).
- I won’t pledge more shares just to avoid selling.
What should you watch while you hold?
Your MTF ledger, your pledged shares and the interest charged so far.
- I check the interest I’ve been charged, not just the share price.
- I review the trade on the date I planned to, and don’t just let it roll on.
- I watch for the same fall hitting all my holdings at once. A market-wide drop doesn’t care how many stocks you own.
What about stop-losses?
They matter more with borrowed money, but they don’t promise the exact price you set.
A stock can open below your stop after bad news. Our loss sums show what a fall does to your own money.
If you’ve taken a big loss, what then?
Stop using borrowed money for a while. Rebuild with your own, smaller positions before you think about MTF again.
Trying to win a loss back with more leverage is how a bad trade becomes a much bigger one. If you’re under pressure from debts, consider talking to a SEBI-registered adviser or a financial counsellor.