💸 Margin Trading
📚 US Capital Private Bank Knowledge Base
📖 Definition
Margin Trading involves borrowing funds from a broker or financial institution to purchase securities or other financial instruments. This allows traders to increase their buying power and potential returns by using leverage, but also increases risk.
⚙️ How It Works
Traders deposit an initial margin (collateral) and borrow additional funds to open larger positions than their capital alone would allow. Profits and losses are magnified relative to the position size. Maintenance margin requirements ensure the trader has sufficient equity to cover losses.
📝 Key Features
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📈 Leverage: Amplifies gains and losses.
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💰 Initial Margin: Upfront collateral required to open a position.
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🔄 Maintenance Margin: Minimum equity level to keep the position open.
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⚠️ Margin Call: Demand for additional funds if equity falls below maintenance margin.
✅ Benefits
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Increased buying power and potential profits.
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Ability to diversify investments with less capital.
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Access to larger positions in various markets.
⚠️ Risks & Considerations
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Magnified losses can exceed initial investment.
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Margin calls may require rapid infusion of funds or forced liquidation.
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Interest costs on borrowed funds reduce overall returns.
🔎 Related Terms
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📊 Leverage Ratio
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⚠️ Margin Call
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📉 Stop Loss Order
📚 References
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🌐 Securities and Exchange Commission (SEC) – Margin Trading Basics
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📄 FINRA – Understanding Margin Accounts
📞 Contact US Capital Private Bank
📧 Email: [email protected]
🌐 Website: https://uscapitalprivatebank.com