Margin Trading: Conclusion
  1. Margin Trading: Introduction
  2. Margin Trading: What Is Buying On Margin?
  3. Margin Trading: The Dreaded Margin Call
  4. Margin Trading: The Advantages
  5. Margin Trading: The Risks
  6. Margin Trading: Conclusion

Margin Trading: Conclusion

Here's the bottom line on margin trading:

You are more likely to lose lots of money (or make lots of money) when you invest on margin.

Now let's recap other key points in this tutorial:

  • Buying on margin is borrowing money from a broker to purchase stock.
  • Margin increases your buying power.
  • An initial investment of at least $2,000 is required (minimum margin).
  • You can borrow up to 50% of the purchase price of a stock (initial margin).
  • You are required to keep a minimum amount of equity in your margin account that can range from 25% - 40% (maintenance margin).
  • Marginable securities act as collateral for the loan.
  • Like any loan, you have to pay interest on the amount you borrow.
  • Not all stocks qualify to be bought on margin.
  • You must read the margin agreement and understand its implications.
  • If the equity in your account falls below the maintenance margin, the brokerage will issue a margin call.
  • Margin calls can result in you having to liquidate stocks or add more cash to the account.
  • Brokers may be able to sell your securities without consulting you.
  • Margin means leverage.
  • The advantage of margin is that if you pick right, you win big.
  • The downside of margin is that you can lose more money than you originally invested.
  • Buying on margin is definitely not for everybody.
  • Margin trading is extremely risky.
We must emphasize that this tutorial provides a basic foundation for understanding margin. It is meant to serve as an educational guide, not as advice to trade on margin.

  1. Margin Trading: Introduction
  2. Margin Trading: What Is Buying On Margin?
  3. Margin Trading: The Dreaded Margin Call
  4. Margin Trading: The Advantages
  5. Margin Trading: The Risks
  6. Margin Trading: Conclusion
RELATED TERMS
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  2. Buying On Margin

    The purchase of an asset by paying the margin and borrowing the ...
  3. Margin Debt

    1. The dollar value of securities purchased on margin within ...
  4. Margin Call

    A broker's demand on an investor using margin to deposit additional ...
  5. Cross Margining

    An offsetting position where market participants are able to ...
  6. Minimum Margin

    The initial amount required to be deposited in a margin account ...
RELATED FAQS
  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 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 >>
  3. What does it mean when I get a maintenance margin call?

    Understand how maintenance margin calls work, and learn about how margin requirements are different for trading stock versus ... Read Answer >>
  4. What are my options when I get a margin call?

    Understand what a margin call means and the two primary options for meeting a margin call, such as depositing additional ... Read Answer >>
  5. 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 >>
  6. Why is purchasing stocks on margin considered more risky than traditional investing?

    Learn why purchasing stocks on margin is riskier than traditional investing, although it can be more profitable when it is ... Read Answer >>

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