What is Margin Trading in Stocks?

Author: nicolas tang

margin tradin

Well in order to trade stocks in any way, first you must consider having a brokerage account. There are plenty of options that you can choose from and get the best for you.
Secondly, it does not matter whether you are trading simply or you are using margins, you should always practice first on a demo account. Consider your finances because going straight into the market with something you’re not aware of could be extremely dangerous and may cost you a lot of money. So, it is always better to practice on a demo account first.

What is a margin?

A margin is simply a term widely used in stocks trading. Buying margin basically means that you are borrowing money from a broker to buy the stock. It is a loan from your brokerage that you can use to buy even more stocks than you’d normally be able to.
A huge number of investors is also attracted towards cryptocurrency. Especially, when it comes to use Margin/leverage to trade crypto. On Phemex it is now absolutely easy to trade these instruments using up to 100X leverage.
Phemex is a cryptocurrency derivatives exchange offering Bitcoin and USD settled perpetual contracts of BTC, ETH, XRP, LTC, EOS, with up to 100X leverage. It is an innovational, easy to use, professional, trustworthy and one of the safest exchanges in the market.

What is margin trading?

Margin trading is not typically designed for a specific type of person. It may be right for any investor who is looking for additional leverage in their investment.
For example, A person wants to buy 1,000 shares of a (ABC) stock at $10 per share. But he only has $5,000 investable cash available. This way, in a margin account one may use his $5,000 in cash and borrow the other $5,000 from the broker to make the purchase. But everything has its pros and cons as margin may provide a sudden benefit but on the other side, it may also cause losses with the same speed.

What does it mean?

Which means if someone has bought 1,000 shares at a price of $10 per share using $5,000 in cash and $5,000 using leverage, and if the price of the stock moves in the other direction, which causes the price of the stock to fall from $10,000 to $9,000. This may simply cause $1,000 or 20% loss of the total equity of the investor.

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Click here to read about Margin Trading Crypto Explained

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