What Is Margin?
Margin is borrowed capital that lets a trader take positions larger than their account cash. For example, with 50% margin, $10,000 of cash controls $20,000 of positions.
For stock traders, margin is typically governed by Reg T (in the US) requiring 50% initial margin and 25% maintenance margin. For futures, margin requirements are much lower (often 5-10%), allowing much higher effective leverage. Crypto retail exchanges sometimes offer 100x+ margin — which is essentially a fast lane to liquidation.
Margin call: when account equity falls below the maintenance margin requirement, the broker demands additional capital or forcibly closes positions. Margin calls can wipe accounts overnight during sharp adverse moves.
Margin is a tool that amplifies both wins and losses proportionally. Most professional traders use modest margin (1.5-3x leverage); retail traders blowing up accounts almost always do so via excessive margin combined with concentrated bets.
Related terms
- Leverage — Borrowed capital used to increase trade size beyond what cash alone allows.
- Drawdown — The peak-to-trough decline in account equity during a losing streak.
- Liquidation — Forced closure of a leveraged position when collateral falls below maintenance margin.