Margin is borrowing money from your broker to buy a stock and using your investment as collateral.
Margin trading 3 involves borrowing against securities you already own to purchase additional securities. The following example shows how the same trade works in a cash account vs. margin account.argin Account-Loss. If the stock price drops to $40, the loss will be $10 per share plus the cost of the margin loan. In this example, the investor loses 40% of his or her cash investment and must still pay back the margin loan plus interest. A margin account is a loan account by a share trader with a broker which can be used for share trading.n finance, a margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of their counterparty (most often their broker or an exchange). Margin is borrowing money from your broker to buy a stock and using your investment as collateral. Investors generally use margin to increase their purchasing power so that they can own more stock without fully paying for it. But margin exposes investors to the potential for higher losses. But if you bought the stock on margin  paying $25 in cash and borrowing $25 from your broker  you'll earn a 100 percent return on the money you invested. Of course, you'll still owe your firm $25 plus interest. The downside to using margin is that if the stock price decreases, substantial losses can mount quickly. Margin Account-Gain. If an investor buys stock for $50 a share, he or she pays $25 per share (the initial margin) and borrows $25. If the stock rises to $60, the profit is still $10 - but it's a 40% gain on the initial investment. Of course, the borrowed $25 per share, plus interest, needs to be repaid.argin Account-Loss. If the stock price drops to $40, the loss will be $10 per share plus the cost of the margin loan. In this example, the investor loses 40% of his or her cash investment and must still pay back the margin loan plus interest. The Basics. Buying on margin is borrowing money from a broker to purchase stock. You can think of it as a loan from your brokerage. Margin trading allows you to buy more stock than you'd be able to normally. To trade on margin, you need a margin account. This is different from a regular cash account, in which you trade using the money in the account.  As a result, Scottrade can take action, such as issue a margin call and/or sell securities in your account, in order to maintain the required equity in the account. It is important that you fully understand the risks involved in trading securities on margin.argin Disclosure Statement. Scottrade is furnishing this document to provide some basic facts about purchasing securities on margin, and to alert you to the risks involved with trading securities in a margin account. Margin Trading. Trading on margin allows you to leverage securities you already own to purchase additional securities, sell securities short, protect your account from overdraft, or access a convenient line of credit. Understand How Margin Works. Let's say you buy a stock for $50 and the price of the stock rises to $75. If you bought the stock in a cash account and paid for it in full, you'll earn a 50 percent return on your investment.ut if you bought the stock on margin  paying $25 in cash and borrowing $25 from your broker  you'll earn a 100 percent return on the money you invested. Of course, you'll still owe your firm $25 plus interest. The collateral for a margin account can be the cash deposited in the account or securities provided, and represents the funds available to the account holder for further share trading. On United States futures exchanges, margins were formerly called performance bonds.n finance, a margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of their counterparty (most often their broker or an exchange).
https://us.etrade.com/active-trading/margin-trading https://en.wikipedia.org/wiki/Margin_(finance) http://www.sec.gov/investor/pubs/margin.htm https://us.etrade.com/active-trading/margin-trading http://www.investopedia.com/university/margin/margin1.asp https://www.scottrade.com/disclosures/margin.html https://www.fidelity.com/trading/advanced-trading-tools/margin-trading http://www.sec.gov/investor/pubs/margin.htm https://en.wikipedia.org/wiki/Margin_(finance)
what is margin in stock trading