Margin Trading

Borrowing money from a broker to buy securities, using your existing portfolio as collateral to amplify potential gains and losses.

Margin trading lets you buy more securities than your cash balance allows by borrowing from your broker. This leverage can amplify returns but equally amplifies losses — including the risk of losing more than your initial investment.

How Margin Works

**Initial margin**: Typically 50% — you put up half the purchase price, broker lends the rest
**Maintenance margin**: Usually 25-30% — if your equity falls below this, you face a margin call
**Margin call**: Broker demands you deposit more funds or sell positions to cover losses
**Interest**: You pay interest on borrowed funds (typically 6-12% annually)

Risks

Margin calls can force you to sell at the worst possible time. In extreme market drops, losses can exceed your entire deposit.

FAQ

Is margin trading suitable for beginners?

No. Margin trading is high-risk and not recommended for beginners. Start with a cash account, learn the fundamentals, and only consider margin after you have significant experience.

What happens if I can't meet a margin call?

Your broker will liquidate some or all of your positions to cover the shortfall. You may still owe money if the liquidated amount doesn't cover the margin loan.