◈ GLOSSARY · TRADING & MARKETS
Margin (Brokerage).
A definition, in plain English — with the books that teach it.
ClearValue Books · reviewed against sources ·
◈ DEFINITION
What it means
Definition
Borrowing money from your broker to buy more securities than your cash would allow. The borrowed amount accrues interest, and the securities serve as collateral. If the account value drops far enough, the broker issues a margin call and can liquidate positions without asking — usually at the worst possible price.
◈ IN PRACTICE
Example
You have $10,000 in cash and use 2:1 margin to buy $20,000 of stock. A 25% drop in the stock leaves the position worth $15,000 — but you still owe $10,000, so your equity is $5,000. You've lost 50% on a 25% move. A further drop triggers the margin call.
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