A margin account is an account offered by brokerages that allows investors to borrow money to buy securities. An investor might put down 50% of the value of a purchase and borrow the rest from the broker. The broker charges the investor interest for the right to borrow money and uses the securities as collateral.

The specific calculations as to how margin works get a little more complicated, but you can learn about this in our Margin Trading tutorial.

The important thing to understand about margin is that it has consequences. Margin is leverage, which means that both your gains and losses are amplified. Margin is great when your investments are going up in value, but the double-edged sword of leverage really hurts when your portfolio heads south. Because margin exposes you to extra risks, it's not advisable for beginners to use it. Margin can be a useful tool for experienced investors, but until you get to that point, play it safe.

  1. How much can I borrow with a margin account?

    Understand the basics of margin accounts and buying on margin, including what amount investors can typically borrow for purchases ... Read Answer >>
  2. What is the interest rate offered on a typical margin account?

    Learn about the basics of trading on margin accounts, specifically the rate of interest that is typically charged for margin ... Read Answer >>
  3. How exactly does buying on margin work and why is it controversial?

    Learn how purchasing stock on margin works, and understand the risk associated with margin accounts that make the strategy ... Read Answer >>
  4. What happens if I cannot pay a margin call?

    Minimum margin is the amount of funds that must be deposited with a broker by a margin account customer. With a margin account, ... Read Answer >>
  5. How does margin trading in the forex market work?

    When an investor uses a margin account, he or she is essentially borrowing to increase the possible return on investment. ... Read Answer >>
  6. Do you have to sell your stocks when you get a margin call?

    Understand the implications of a margin call and what an investor's options are when the stock he purchased on margin falls ... Read Answer >>
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  1. Buying On Margin

    The purchase of an asset by paying the margin and borrowing the ...
  2. Margin Call

    A broker's demand on an investor using margin to deposit additional ...
  3. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  4. Margin Account

    A brokerage account in which the broker lends the customer cash ...
  5. Initial Margin

    The percentage of the purchase price of securities (that can ...
  6. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
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