For the traders in the share market the Demat and trading account are important and equally important is margin money and exposure that they can have on their provided margin. It is the amount that a trader needs to provide to the broker and the broker offers certain credit on the provided margin. This together makes the credit line of the trader as per which he can trade in the market. The trader who wants frequent trading or trading in bulk it is much important to go for the broker who can offer low brokerage & high exposure as with such broker he can go for more trades that can help him earn more profit.
As far as the exposure to margin or credit line is concerned there is no written rule and ever company or broker is free to act as per own rules. Doubtlessly there is some standard practice in the market which majority of the brokers or companies follow. Usually, in this market the trader gets ten times credit to his margin money but that can suffice the need of a retail trader only and not a bulk trader. For a bulk trader it is much required to have more credit which can be offered by the broker in certain conditions only. The low brokerage & high exposure can be a favorable situation for the bulk trader as he can easily go for more trades in routine that can help him build a better portfolio.
The credit line:
For an effective credit line the broker or company looks for many things. The terms with the client as well as the financial profile of the client and his trading history can be termed as the primary factors that play a major role in deciding his credit limit. For the broker extending credit to the client is a big trouble as many times clients cannot use it prudently and land in trouble which can create issues for them as well as the broker. The moment they find good credit they start exploring it and one wrong trade can lead them to deep trouble where they have to make urgent payment also. In such case if the client does not have such payment the broker has to go for legal actions also which can be much troublesome.
The best option:
However, this is not the case with every trader as there are also many such traders who know how to use the credit line prudently and make best out of it. They use it at the moment they feel that now the trade volume has to be increased and more volume can prove more helpful to them in fetching more profit. Though for a broker also it is good to offer more credit as the client can have more trades which can help him to have more profit also. However, after checking a few parameters the broker can offer increased limit which can help both the parties.
