Practice of buying stock with money borrowed from the broker. In this arrangement, the investor makes a cash down payment (called the margin) with the broker and can purchase stocks worth about twice the cash amount. The broker charges interest on this loan (in addition to the commission on each buy/sell trade) and the investor has to keep the entire stockholding with the broker as collateral. Also, the investor has to put up additional cash in case the value of the stockholding falls below a certain amount. Margin trading is a double-edged sword - it cuts both ways. If the stock price rises, the investor makes twice as much profit as with his own cash only. Similarly, if the stock price falls, the investor loses twice the amount. In slang, this practice is called 'investing on steroids.'
Related information about margin trading:
- Margin Trading: Introduction | Investopedia
Investing on margin isn't necessarily gambling, but you can draw some parallels between margin trading and the casino.
- Margin Trading: What Is Buying On Margin? | Investopedia
Buying on margin is borrowing money from a broker to purchase stock. ... Margin trading allows you to buy more stock than you'd be able to normally. ... to margin certain stocks, so check with them to see what restrictions exist on your margin ...
- Margin (finance) - Wikipedia, the free encyclopedia
In extreme cases, certain securities may cease to qualify for margin trading; in such a case, the brokerage will require the trader to either fully fund their position, ...
- Investor Tips: Margin - Borrowing Money To Pay for Stocks
Apr 17, 2009... such as the NYSE and FINRA, have rules that govern margin trading. Brokerage firms can establish their own requirements as long as they ...
- Introduction to Margin Trading
There are two ways to purchase stocks: the buyer can pay the purchase price in full or on by using a margin account. In a margin account purchase, the buyer ...
- Margin trading
Margin trading is funded by brokers or banks. Banks need the cooperation of the broker through which the trading is done in order to track positions in margin ...
- 9 Simple Tips For Successful Margin Trading - Stock Trading To Go
Sep 6, 2007 ... Margin trading is a great form of leverage when investing in the stock market. Not everyone uses it because not everyone is approved for it, and ...
- Margin Trading - Using Margin to Leverage your Profits or Losses
Margin trading is a way to magnify your buying power by borrowing money from your broker for up to 50% of a stock purchase.