TRADING GLOSSARY

Margin: borrowing money to trade bigger

Margin is the collateral you deposit with your broker to open leveraged positions. It allows you to control positions larger than your actual capital. A 10% margin requirement means you deposit $1,000 to control a $10,000 position — the broker lends you the remaining $9,000.

Types of margin

Initial margin: The amount required to open a position. Maintenance margin: The minimum equity you must maintain while the position is open (typically 25-50% of the position value for stocks). Free margin: The amount available in your account to open new positions or absorb losses on existing ones.

Margin calls

If your losses reduce your equity below the maintenance margin level, you receive a margin call. You must either deposit more funds or close positions to restore the required equity level. If you fail to do so, the broker will liquidate your positions at market price — often at the worst possible time.

Margin by market

US stocks: 50% initial margin, 25% maintenance margin (Reg T). Forex: Varies by jurisdiction — 3.3% (30:1) in the EU, 2% (50:1) or lower outside the EU. Futures: Day trading margins can be as low as $500 per contract, with overnight margins of $5,000+.

Understanding margin is crucial for avoiding unexpected liquidation. AskTrade’s Risk Assessment Agent always considers margin implications when suggesting position sizes.

Disclaimer: This is for educational purposes only and does not constitute financial advice. Trading involves significant risk of loss.

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AskTrade analyses are AI-generated and do not constitute financial advice.