What is margin and leverage?

Margin and leverage are concepts that allow traders to open large positions with small deposits. What is margin? Margin trading refers to using borrowed funds from a broker to purchase a financial asset or assets in a larger volume. Traders use margin to buy more stock than they would normally be able to (or afford to do).

What is margin trading?

Margin trading refers to using borrowed funds from a broker to purchase a financial asset or assets in a larger volume. Traders use margin to buy more stock than they would normally be able to (or afford to do). Margin is then used to create leverage to enter larger trades or open larger positions, in a bid to magnify gains.

What is the minimum margin for a 100:1 leverage?

A leverage of 100:1 requires a minimum margin of 1% of the total position size. If you have a $10,000 trading account, you could theoretically open a position size worth $1,000,000 with your total account size allocated as the margin for the trade (1% of $1,000,000).

What happens after you open a leveraged trade?

After you open your leveraged trade, the initial margin requirement is automatically deposited back to your trading account, together with any realised profits or losses on the trade. Margin and Leverage: What’s the Difference?