USA HISTORY

Detailed explanation-1: -Buying on margin involves getting a loan from your brokerage and using the money from the loan to invest in more securities than you can buy with your available cash. Through margin buying, investors can amplify their returns-but only if their investments outperform the cost of the loan itself.

Detailed explanation-2: -What is margin? Margin lending is a flexible line of credit that allows you to borrow against the securities you already hold in your brokerage account. When used correctly, margin loans can help you execute investment strategies by increasing your borrowing power to purchase more securities.

Detailed explanation-3: -With a cash account, it’s your own money that is invested. With a margin account, you can buy a stock (or financial instruments) by borrowing the balance amount funds from a broker. When you borrow this money from a broker to purchase financial instruments, your own eligible securities serve as collateral.

Detailed explanation-4: -A margin loan allows you to borrow against the value of securities you already own. It’s an interest-bearing loan that can be used to gain access to funds for a variety of reasons that cover both investment and non-investment needs.

Detailed explanation-5: -While margin loans can be useful and convenient, they are by no means risk free. Margin borrowing comes with all the hazards that accompany any type of debt-including interest payments and reduced flexibility for future income. The primary dangers of trading on margin are leverage risk and margin call risk.