Margin
Funds deposited as collateral to open a leveraged position. If losses erode your margin, your broker may issue a margin call.
Margin is the collateral you deposit with a broker to open and maintain a leveraged position. It is not a fee — it is a good-faith deposit held against potential losses.
Initial margin is the minimum required to open a position. Maintenance margin is the minimum required to keep it open. If your account value drops below the maintenance margin, your broker issues a margin call — you must deposit more funds or the broker liquidates positions to cover the shortfall.
Margin accounts expand your buying power but create real risk of losses exceeding your deposit. Understand the margin requirements and liquidation policy of your specific broker before trading on margin.
Example
Your broker requires 25% initial margin. You deposit $5,000, which allows you to buy up to $20,000 of stock. If the position falls in value and your equity drops below the maintenance margin (say 20% = $4,000), you receive a margin call to top up or close positions.
Related Terms
Broker
An intermediary who executes buy and sell orders on your behalf. Modern brokers are typically electronic platforms.
BeginnerLeverage
Using borrowed capital to increase position size — amplifying both gains and losses beyond your own equity.
IntermediateLong Position
Buying an asset expecting its price to rise. You profit when the price goes up; you lose when it goes down.
BeginnerShort Position
Borrowing shares and selling them, hoping to buy them back cheaper. Profit when the price falls; loss when it rises.
Intermediate