Margin Trading

Margin trading is a trading practice where an investor borrows funds from a broker to trade financial assets, such as stocks, currencies, or commodities, with the intention of increasing their potential returns. Essentially, it allows traders to open larger positions than their actual capital would allow by using leverage, which magnifies both gains and losses.

In margin trading, the trader only needs to deposit a fraction of the total trade value (called the margin), while the broker lends the remaining amount. The borrowed amount must be repaid with interest, and brokers typically require traders to maintain a certain level of equity in their accounts (called the maintenance margin) to cover potential losses.