Margin Trading: Conclusion
AAA
  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

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
Margin Trading: Conclusion
RELATED TERMS
  1. Bid Wanted

    An announcement by an investor who holds a security that he or ...
  2. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
  3. Short Put

    A type of strategy regarding a put option, which is a contract ...
  4. Wingspread

    To maximize potential returns for certain levels of risk (while ...
  5. Volatility Smile

    A u-shaped pattern that develops when an option’s implied volatility ...
  6. Nadex

    Nadex stands for the North American Derivatives Exchange, a regulated ...
  1. Why do share prices fall after a company has a secondary offering?

    The best way to answer this question is to provide a simple illustration of what happens when a company increases the number ...
  2. Why do stock prices change following news reports?

    Stock prices move up and down every minute due to fluctuations in supply and demand. If more people want to buy a particular ...
  3. How do I calculate the adjusted closing price for a stock?

    When trading is done for the day on a recognized exchange, all stocks are priced at close. The price that is quoted at the ...
  4. How do I find historical prices for stocks?

    Whether for research purposes, bookkeeping or even general interest in historical performance, this is a question that many ...
comments powered by Disqus
Related Tutorials
  1. Investing For Safety and Income Tutorial
    Bonds & Fixed Income

    Investing For Safety and Income Tutorial

  2. American Depositary Receipt Basics
    Economics

    American Depositary Receipt Basics

  3. Stock Basics Tutorial
    Investing Basics

    Stock Basics Tutorial

  4. Binary Options Tutorial
    Options & Futures

    Binary Options Tutorial

  5. Top ETFs And What They Track: A Tutorial
    Mutual Funds & ETFs

    Top ETFs And What They Track: A Tutorial

Trading Center