Risk & returns
Margin trading uses broker credit and collateral to hold positions larger than available cash. Equity must remain above maintenance requirements or positions can be closed.
Make it click
A deposit controls a larger item while its full value keeps changing. If the deposit cushion becomes too small, the provider demands more or takes the item back.
Now put that into markets
The broker marks positions to market, charges interest and applies initial and maintenance margin. Requirements can increase during volatility.
Account equity equals assets less borrowed amounts and other obligations. A margin call can require cash or forced liquidation without waiting for recovery.
Read collateral eligibility, house margin, interest, concentration rules and liquidation discretion. Model gaps and cross-position effects.
Losses and interest can exceed the original cash, and the broker can tighten terms. A stop order cannot guarantee protection from a gap.
Takeaway
