Good question — margin amplifies both gains and losses, so risk management is essential. Below are practical, India‑relevant tips (actionable rules, tools to use, and what to watch for), with short explanations and sources you can check.

Priority rules (must-do)

1. Know the product and your broker’s rules before you trade.

   • Read your broker’s margin/MTF policy (eligible securities, max leverage, auto‑squareoff, penalties). Broker rules vary and matter for forced liquidation and charges. (support.Zerodha.com)

2. Limit leverage — use the smallest margin needed.

   • Treat margin as a tool, not a way to multiply position size recklessly. Lower leverage reduces probability of margin calls and big losses. Many brokers limit intraday leverage (e.g., up to ~4–5x for MIS/CO); overnight MTF/MTF conditions differ. (support.Zerodha.com)

3. Set and honour a stop‑loss on every leveraged trade.

   • Automated stop‑loss or cover orders reduce the chance of sudden, large losses. Use mental + actual stop levels; for higher volatility consider wider stops or smaller position size. (Investopedia.com)

Position sizing & risk limits 4. Apply a fixed risk-per-trade rule (e.g., 1–2% of capital).

• The “2% rule” (or 1% for very volatile assets) limits how much of your total equity you can lose on any one trade. Combine with stop‑loss to calculate position size. (Investopedia.com)

5. Use risk:reward and only take trades with reasonable R:R (e.g., ≥2:1).
   • Ensure potential upside justifies the risk you accept; this improves long‑term expectancy. (Investopedia.com)

Liquidity, monitoring, and buffers 6. Keep a margin buffer — maintain equity well above the maintenance margin.

• Don’t run accounts right at the minimum margin. Markets move quickly; a buffer reduces forced square‑offs. (icicidirect.com)

7. Trade liquid instruments and avoid low‑liquidity stocks on margin.
   • Illiquid stocks can gap and trigger larger losses or poor execution when being squared off. Check your broker’s eligible list. (support.Zerodha.com)

Execution tools & hedging 8. Use cover orders (CO) and bracket orders (where available) to combine entry with automatic stop.

• These reduce execution risk and enforce discipline; many Indian brokers provide MIS/CO for intraday risk control. (support.Zerodha.com)

9. Hedge large positions when appropriate (options or correlated instruments).
   • Buying protective puts or shorting a correlated ETF/future can cap downside when you must hold a leveraged position overnight. (Hedging costs need to be considered.)

Costs and operational risks 10. Factor in interest, fees, and tax: margin funding interest and frequent trading costs reduce net returns. - Daily/overnight interest and charges can erode profits; check your broker’s rate and how interest is calculated. (5paisa.com)

11. Know margin‑call processes and square‑off policy.
    • Some brokers auto‑square off without prior notice and may charge a fee. Understand timelines and how to add funds fast. (Zerodha.com)

Behavioural & process controls 12. Predefine stop, target, and maximum daily/monthly loss limits; stop trading if you hit them. - Loss‑limit rules (e.g., stop for the day if you lose 3–6% of capital) prevent revenge trading and large drawdowns. (Investopedia.com)

13. Start small and journal trades.

    • Use small positions to test strategy under margin; log entry/exit, rationale and mistakes to improve. Paper‑trade or use minimal margin initially.

14. Diversify exposures and avoid correlated concentration.

    • Margin can tempt you to concentrate; instead spread risk across sectors/strategies to reduce single‑event blowups. (5paisa.com)

Regulatory & compliance notes (India) 15. Be aware SEBI/exchange rules (peak margin, margin collection) affect available leverage and brokers’ behaviour. - SEBI/Exchange circulars have tightened peak margin and square‑off rules; these can change available leverage and risk dynamics — check broker updates/announcements regularly. (support.Zerodha.com)

Quick checklist to use before placing a margin trade

• Is the leverage level small enough for your risk tolerance?
• Stop‑loss, target, and position size set (risk ≤ 1–2% equity)?
• Margin buffer left in account after entering?
• Instrument liquid and on broker’s eligible list?
• Interest/fees and square‑off rules understood?
• Contingency plan if a margin call arrives?

If you want, I can:

• Convert this into a one‑page trading risk checklist you can print.
• Show a short worked example (numbers) of position sizing using a 1–2% risk rule and stop‑loss.
• Check a specific broker’s margin/interest rules (tell me the broker) and summarise them.

Sources: Zerodha support & policies, ICICI Direct MTF guidance, 5paisa/other Indian broker explainers, and Investopedia articles on position sizing/stop losses and limiting losses. (support.Zerodha.com)

Would you like a numeric example showing how to size a margin trade for your account balance?