Platinum Swing Trade Alerts

The 10-Buck Broker (Long-Term Stock Picks)


No announcement yet.

Margin trading explained

This is a sticky topic.
  • Filter
  • Time
  • Show
Clear All
new posts

  • Margin trading explained

    In this short post, i'm going to give you a bare bones explanation of margin trading and how it works.

    Trading on margin means trading with borrowed money. For the purposes of this post we'll focus on the margin associated with stocks.
    The benefit of margin trading is that you can make quite a bit more money even if you don't have much cash to put into the market. In the stock market you have two basic margin ratios...4:1 and 2:1. Here's how they work:

    If you have an account and you want to use your 2:1 margin to buy a stock you look at the amount of cash in your account and multiply by 2. Example: An account with $10K cash can buy $20K worth of a stock. The same goes for 4:1. The only difference is 4:1 margin is strictly for day trades. Meaning you have to buy and sell your stock using that margin in the same day. Example: An account with $10K cash can buy $40K worth of a stock.

    When you first open a brokerage account you have the option of having an all cash account meaning you can't use any margin or a margin account which of course let's you borrow funds from the broker. Margin accounts require a small fraction more to start than all cash accounts but most it's still in the low thousands so newcomers don't need to worry.

    In the world of finance, trading on margin is a bit of a touchy subject. Some say its the worst thing you can do and some say it can be helpful if used properly. My personal opinion is that unless you start trading with a huge sum you should be margined to the hilt once you've gotten a few years under your belt. Spend a few years practicing using ALL cash. DO NOT touch margin when you're first starting out but once you have a pretty good handle on things give it a go.

    Platinum Swing Trade Stock Alerts(FREE 14-Day Trial)

    The 10-Buck Broker (Long-Term Stock Picks)

    Best Stock Picking Services

    Sign up for the forum to reply to this post!!!

    Best FOREX Signals Software

    Stock Market Investing For Beginners

    "Step into the arena and hold on to your hat. Don't get discouraged if you don't make 8 trillion dollars in your first month. Trading is not a get rich quick scheme. Realize that trading is a skill and just like any other skill it takes time to learn. Have convictions in your decisions in life and trading. Ignore the comments and "advice" of those that have never traded a day in their life."

    Good KARMA and positive energy abound.

    Terms Of Service

    Disclaimer: This website provides information about the stock market and other investments. This website does not provide investment advice and should not be used as a replacement for investment advice from a qualified professional. This website is for informational purposes only. The Author of this website is not a registered investment advisor and does not offer investment advice. You, the reader, bear responsibility for your own investment decisions and should seek the advice of a qualified securities professional before making any investment.

    Promoted content: You should assume that this website has an affiliate relationship and/or another material connection to the persons or businesses mentioned in or linked to from this website and may receive commissions from purchases you make on subsequent websites. Always exercise due diligence before purchasing any product or service. This website contains advertisements.
    Best stocks to buy now Stock Market
    Best stocks to buy now
    Dow Jones TodayDJIA

  • #2
    Margin trading for the win. Its almost impossible to make any progress without it. Even 2:1 helps significantly.