Analysis of Bajaj Auto Trade: 10% ROI Using Margin Trading Facility

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  • Editors Pick

This is an analysis of our Bajaj Auto (NS: BAJA ) trade using Margin Trading Facility (or MTF). The article shares the logic behind the entry and exit along with the outcome of the trade. The exact entry point along with the trade log can be found in the video linked at the end of the article.

What is Margin Trading Facility (MTF)?

If you are unfamiliar with the concept of MTF, it is basically a borrowing mechanism using which you have the potential to double your returns (and losses, as they both go hand-in-hand).

So if you have ₹100, you can avail of an additional margin worth ₹100 from the broker for an additional charge of ₹20 per ₹50,000 of margin availed. Including all other costs, for a period of up to 90 days, you can expect to pay a smudge under 1% as total costs for the margin funding.

The logic behind the trade

Entry was taken based on the following factors:

  1. Price above 20MA on the Daily chart.
  2. Momentum picking up on the Daily chart.

There was also a range breakout on smaller timeframes which was not the main basis of the trade but was accounted for when we considered how momentum was picking up.

The exit was based on the following factors:

  1. Price rejection at 3500+ levels (intraday).
  2. Bajaj Auto has its Q3 earnings announcement on 19th Jan 2022, so the open position would add additional risk.
  3. The position was giving a decent ROI.

The entry was at ₹3,295 and partial gains were booked at ₹3,477. A small quantity (without leverage) is still being trailed to follow the broader trend.

The outcome of the trade

The total ROI on own capital is 10.17% thanks to the leverage provided by MTF. If this trade was taken without leverage, the ROI would be 5.08%.

I am curious to hear your thoughts on MTF. Do you feel it's a good risk-reward proposition? Do you use it for your trades?

If you wish to look at the entry & exit points on the chart and understand the numbers better, please watch the video linked below.


Disclaimer: This article is meant for educational and informational purposes only. I am not SEBI registered. Please consider the risks of trading and leverage carefully.

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  • Rajkumar Sharma @Rajkumar Sharma
    it is good fascility but I don't use margin
    Like 0
    • Krunal Rindani @Krunal Rindani
      @Rajkumar Sharma fair enough. thanks for the comment!
      Like 0
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