Margin Trading Conclusion

We provide you lists of key points you need to understand before  investing on margin trading. As mentioned in some tutorials, margin is risky and you could lose all the money on your account. Always keep these in mind to avoid great risk.

Key points:

  • When you buy on margin, you are borrowing money from your broker  in order to avail a stock.
  • Trading on Margin maximizes your buying possibility.
  • You are required to put at least $2,000 initial investment which is only a minimum margin.
  • Half of the purchase price of a stock can be borrowed (initial margin).
  • With a range of 25%-40%, keeping a minimum amount of equity is required in your margin account, which is basically a maintenance margin.
  • Marginable securities will serve as an insurance for the loan.
  • If you arrange a loan, you are required to pay for the interest on the amount you borrow.
  • On margin trading, you cannot buy all stocks because not all of them are qualified.
  • The margin agreement must be read and you must deeply understand its allegations.
  • In the event that the equity in your account falls under the maintenance margin, a margin call will be proclaimed by the brokerage.

  • Liquidating stocks or putting more money in your account can trigger a margin call.
  • Brokers may manipulate your account by selling your securities without your consultation.
  • Margin is equal to leverage.
  • Your advantage in margin is to pick right, and you’ll earn bigger profit.
  • You can lose more money than your investment.
  • Buying on margin do not apply to all traders.
  • Margin trading is tremendously risky.

These key points will serve as a reminder and a guidance. We do not discourage you to engage in margin trading, but instead, we only provide these information to help you gain a better understanding before deciding to try it out.

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