Margin trading is the act of trading a financial asset using borrowed funds from a broker, who serves as the broker’s security for the loan. Margin is the amount borrowed from a broker to buy an investment, representing the discrepancy between the investment’s total worth and the loan sum.
It’s a high-risk trading method that calls for the borrower to put money up in a brokerage account as security for a loan and pay interest on the money borrowed.
In a normal brokerage account known as a “margin account,” an investor is permitted to use the current cash or securities in their account as security for a loan. Margin leverage has a tendency to magnify both gains and losses. A margin call in the case of a loss could mandate that your broker sell securities without your permission.
