The Ins-and-Outs of Trading on Margin

Trading on margin is similar to the phrase “buying on credit.” Using margin for a trade is also known as leveraging, because it involves borrowing money to lever, or boost, the value of a trade.

Margin money is a loan with an interest rate and collateral attached — both of which are set by the broker. The margin interest rate depends on how much you borrow and your relationship with the broker. Cash and stock are popular forms of collateral typically used by margin traders and are based on the account’s size and type of security being traded. Traders must also maintain a margin balance, known as the maintenance margin, in their accounts to cover losse

Margin refers to the money a trader borrows from their broker to purchase securities. Trading on margin is a way to boost your stock or crypto buying power. But while margin trading can inflate profits, it can also generate heavy losses, so it should only be attempted by experienced traders that make use of the proper risk management practices.

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