Margin
Margin is money you borrow from your broker to trade a position larger than your cash balance would otherwise allow. Instead of paying the full cost of a stock or other security yourself, you put up a portion of the value — the rest is a loan from the broker, and the securities you buy (along with other cash or holdings in the account) serve as collateral for that loan.
In practice, when you open a margin account, the broker sets a minimum percentage of the trade's value that you must cover with your own money, often called the initial margin requirement. Once the position is open, the broker also enforces a maintenance margin requirement — a minimum equity level you must keep in the account as the trade's value moves. If your losses push your equity below that floor, the broker issues a margin call, demanding you deposit more cash or securities, or it may close out positions on its own to bring the account back into line.
The nuance that trips up beginners is that margin amplifies both gains and losses relative to your own cash, and it does so quickly. Losing 20% on a fully margined position can wipe out a much larger share of your actual invested cash than a 20% loss would in a cash account, and the broker's math on when a margin call triggers is based on real-time prices, not on what you paid. Margin also is not free — brokers charge interest on the borrowed amount for as long as the loan is outstanding, and that cost eats into returns even if the trade goes nowhere.
It's also worth distinguishing margin from leverage generally: margin is the specific mechanism (a broker loan against your account) that produces leverage, and the rules governing how much you can borrow, how it's calculated, and how quickly a call must be met are set by regulators and exchanges, not by convention.
This term depends on a rule or threshold that changes over time, so no specific figure is quoted here. The entry describes the general shape of initial and maintenance margin requirements but does not state specific percentages. A human editor should confirm current initial margin (commonly discussed as a percentage set under Regulation T in the US) and current maintenance margin minimums against FINRA/exchange rules and the specific broker's disclosures, since these figures and any special day-trading margin rules can differ and change over time.
Margin lets a day trader control a bigger position with less cash, which magnifies both profit and loss on every tick — and a margin call can force a position closed at the worst possible moment if the trade moves against you.
Suppose a stock trades at $50 and you want to buy 200 shares, a $10,000 position. In a cash account you'd need the full $10,000. On margin, if your broker requires 50% initial margin, you'd only need to put up $5,000 of your own money, borrowing the other $5,000. If the stock drops to $40, your position is now worth $8,000 — a $2,000 loss that comes entirely out of your $5,000 of equity, a 40% hit to your own capital from a 20% move in the stock. If your equity falls below the broker's maintenance requirement, you'll get a margin call.
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