Understanding Mark to Market (MTM) in Trading

What is Mark to Market (MTM)?

Mark to market (MTM) is an accounting method where the value of assets and liabilities are assessed based on their current market prices. This approach ensures the recorded value aligns accurately with the market scenario. In the context of trading, MTM is essential to calculate daily profits or losses on open positions.

For example, If you initiate a long entry by buying a security at ₹100 and, by the day's end, its market price rises to ₹105, your MTM profit stands at ₹5. Conversely, if the price drops to ₹95, your MTM reflects a loss of ₹5.