Margin Trading: How Leverage Works & Its Risks
Margin trading means borrowing money from your broker to buy more stock. It amplifies both gains and losses — and brokers will force-close your position (margin call) when losses exceed the threshold.
TL;DR
Margin trading means borrowing money from your broker to buy more stock. It amplifies both gains and losses — and brokers will force-close your position (margin call) when losses exceed the threshold.
What is Margin Trading?
Margin trading means using your own funds as collateral to borrow additional money from your broker to buy more stock. Example: you have $10,000; with 1:2 leverage you can buy $20,000 worth of stock. Gains amplified: stock rises 10% → normal profit $1,000; with margin, profit $2,000 (minus interest). Losses equally amplified: stock drops 10% → margin account loses $2,000 (not just your $1,000). HK margin ratios are typically 1-3x your own capital, depending on stock quality and broker rules.
Key Terms: