What is a Stocks Margin Trading Account?
A Stocks Margin trading account is an account that allows stock traders to control a large amount of stocks trade transaction using little of their own capital while borrowing the rest from their stocks broker.
What's a Stocks Margin Trading Account?
Obtaining this margin account will enable you as a trader to borrow money from your stocks broker to trade stocks with.
The amount of borrowing power your stocks account gives you what is called " stocks leverage", and is usually expressed as a ratio - a ratio of 100:1 means you can control resources worth 100 times your deposit - stocks leverage 100:1 means you can borrow 100 dollars from your stocks broker for every $1 dollar in your stocks account.
What this means in Stocks terms is that with 1% margin in your stocks account you can control one standard lot or 1 contract worth $100,000 with a $1,000 deposit.
However, Trading this stock account increases both potential for profits as well as losses. In Stocks you can never lose more than you invest, losses are limited to your deposits & usually brokers will close a trade which extends beyond your deposit amount by executing a margin call. Stocks traders must therefore try to keep their margin requirement level above that required. By using stocks money management guidelines and keeping your used stocks leverage below 5:1.
To Know More about Stock Leverage & Margin - How Do You Read the Topics Below:
Stocks Leverage and Margin Explained
