Trading Margin Excess

AAA

DEFINITION of 'Trading Margin Excess'

The funds that remain in a margin trading account that are available to use towards the purchase of a new position or the increase of an existing position. Traders and investors often take advantage of margin accounts that provide a leveraged amount of funds with which to trade or invest.

INVESTOPEDIA EXPLAINS 'Trading Margin Excess'

A margin account allows traders or investors the ability to purchase beyond the actual cash value of the account by utilizing leverage. For instance, a trader could have $10,000 cash in a trading account and be able to trade a value of $100,000 with a 10:1 leverage. The trading margin excess is the funding that is currently available to trade with. While margin allows traders and investors the opportunity to profit, caution must be used due to the potential to sustain catastrophic losses.

RELATED TERMS
  1. Buying Power

    The money an investor has available to buy securities. In a margin ...
  2. Margin

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

    A brokerage account in which the broker lends the customer cash ...
  4. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  5. Initial Margin

    The percentage of the purchase price of securities (that can ...
  6. Borrowing Power Of Securities

    The value associated with being able to invest in securities ...
RELATED FAQS
  1. Why do you need a margin account to short sell stocks?

    The reason that margin accounts and only margin accounts can be used to short sell stocks has to do with Regulation T, a ... Read Full Answer >>
  2. How is margin interest calculated?

    Before running a calculation you must first find out what rate your broker-dealer is charging to borrow money. The broker ... Read Full Answer >>
  3. What is a margin account?

    A margin account is an account offered by brokerages that allows investors to borrow money to buy securities. An investor ... Read Full Answer >>
  4. What are the similarities and differences between the savings and loan (S&L) crisis ...

    The savings and loan crisis and the subprime mortgage crisis both began with banks creating new profit centers following ... Read Full Answer >>
  5. What are some common cash-debt strategies that occur during a spinoff?

    Cash-debt strategies that are commonly used to in a spinoff to enable the parent company to monetize the spinoff are debt/equity ... Read Full Answer >>
  6. How can I determine the degree of financial leverage (DFL) for a particular company?

    Fundamental analysis uses the degree of operating leverage (DFL) to determine the sensitivity of a company's earnings per ... Read Full Answer >>
Related Articles
  1. Forex Education

    Forex Leverage: A Double-Edged Sword

    Find out how this flexible and customizable tool magnifies both gains and losses.
  2. Forex Education

    Adding Leverage To Your Forex Trading

    The use of margin to trade in the foreign exchange market can magnify profit opportunities.
  3. Stock Analysis

    Should You Short These Debt-Laden Stocks?

    These stocks have high debt-to-equity ratios making them prime candidates to short.
  4. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  5. Fundamental Analysis

    Calculating Degree of Financial Leverage

    Degree of financial leverage (DFL) is a metric that measures the sensitivity of a company’s operating income due to changes in its capital structure.
  6. Investing Basics

    Netflix's Billion-Dollar Content Licensing Budget

    Understand how Netflix selects the TV shows and movies it streams to its subscribers, and learn how it finances those licensing deals.
  7. Trading Strategies

    Knowing When To Hold And When To Sell

    When deciding whether to sell or hold on to a stock, use the "partial sell" strategy as a way to minimize risks and ensure that you make some profits.
  8. Forex Strategies

    Strategies For Forex Algorithmic Trading

    Algorithmic trading strategies, such as auto hedging, statistical analysis, algorithmic execution, direct market access and high frequency trading, can expose price inconsistencies, which pose ...
  9. Fundamental Analysis

    Financial Analysis: Solvency Vs. Liquidity Ratios

    Solvency and liquidity are equally important for a company's financial health. A number of financial ratios are used to measure a company’s liquidity and solvency, and an investor should use ...
  10. Brokers

    When and How Can Spread Betting Be Profitable

    Providing tax-free income in some countries, spread betting can be highly profitable. Investopedia provides important points for success.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!