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Glossary Finance

Margin (trading)

In trading, margin is money borrowed from a broker to open a larger position than your own cash would allow, secured by your account equity.

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In more detail

The required margin is the position size times the margin percentage; leverage is 100 / margin %. A $50,000 position at 25% margin needs $12,500 of equity and is 4 times leveraged. Gains and losses are both magnified, and a margin call forces you to add money or sell. Not to be confused with Profit margin.

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See also

  • Glossary Profit margin
    Profit margin is profit as a percentage of the selling price: `(price − cost) / price`.
  • Glossary Loan-to-value ratio (LTV)
    The loan-to-value ratio (LTV) is the loan amount divided by the value of the asset securing it, a key measure of lender risk.
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