Your browser does not support JavaScript.

Margin and Leveraged Trading

Margin and leveraged-trading terms for brokerage borrowing, collateral, buying power, margin calls, and borrow costs.

Margin and leveraged trading refers to trading activity where an investor controls market exposure using borrowed funds, collateral, or exchange-required margin rather than paying the full value of a position in cash.

This section is for readers who need to understand how margin accounts, margin loans, buying power, initial margin, maintenance margin, and margin calls affect risk, liquidity, and trade sizing.

Margin can increase exposure, but it does not make a trade better by itself. It adds financing cost, collateral risk, broker liquidation rights, and the possibility that a loss will be larger than the cash initially deposited. Rules also differ by product, account type, broker, exchange, and jurisdiction.

What This Section Covers

Topic	Practical question
Margin accounts and loans	What can the broker lend, what collateral supports the loan, and what can be liquidated?
Buying power and excess equity	How much capacity appears available for new trades, and why can it change quickly?
Margin requirements	What equity must be posted at entry and maintained after prices move?
Borrow costs and eligibility	Which securities can be margined, borrowed, shorted, or excluded from margin treatment?

Why It Matters

Margin is a risk-control issue as much as a funding tool. A leveraged position can be liquidated because account equity, collateral value, concentration limits, product rules, or broker house requirements changed, even when the investor still believes in the trade.

For educational use, separate three ideas:

Exposure: the market value of the position that rises or falls with price.
Equity: the investor’s own value in the account after subtracting the broker loan.
Requirement: the amount of equity or collateral required to open or keep the position.

Key Takeaways

Margin uses collateral and broker credit to create leveraged exposure.
Buying power is a broker calculation, not cash that will necessarily remain available.
Margin calls and forced liquidations can occur quickly in falling or volatile markets.
U.S. securities margin involves Regulation T, FINRA and exchange rules, and broker house requirements; other markets use different regimes.
This material is general financial education, not individualized investment, tax, or regulatory advice.

Official Sources

Margin: Collateral or equity required to support leveraged trading exposure.
Margin Account: Brokerage account that permits borrowing against eligible securities.
Buying on Margin: Purchasing securities with a mix of investor equity and broker credit.
Margin Call: Requirement to add equity or reduce exposure after account equity falls below a requirement.
Short Selling: Selling borrowed securities, often requiring margin and borrow arrangements.