Finance
How does margin trading work?
Margin trading means borrowing money from your broker to buy more investments than your own cash allows. It can amplify gains, but it equally amplifies losses — and if your investments fall too far, the broker can force you to sell (a margin call).
See it in motion.
Watch a 2-minute animated lesson that shows exactly how margin trading works.
Step by step
- 1You borrow from your broker to invest more.
- 2It magnifies both gains and losses.
- 3A 'margin call' forces selling if losses mount.
- 4It's a higher-risk form of leverage.
Frequently asked questions
- How does margin trading work?
- You borrow from your broker to buy more than your cash allows, using your investments as collateral.
- What is a margin call?
- A demand to add money or sell assets when your account value falls below a required level.
- Why is margin trading risky?
- Leverage amplifies losses, and a sharp drop can wipe out your money and trigger forced selling.