Margin trading means borrowing money from your broker to buy more securities than your cash alone allows, using your account as collateral. In the US, stocks generally require 50% initial margin (Regulation T) and at least 25% maintenance margin, and brokers often set higher levels. If your equity falls below maintenance, you get a margin call: deposit funds or sell positions, or the broker can liquidate them for you. Margin magnifies gains and losses and charges interest.
Margin can make a good trade better and turn a bad trade into a disaster. Understanding exactly when a margin call happens is the difference between using leverage and being used by it.
How stock margin works (US)
| Term | Meaning |
|---|---|
| Initial margin | Equity you must put up to buy on margin: 50% under Regulation T |
| Maintenance margin | Minimum equity you must keep: at least 25% under FINRA rules, often 30–40%+ at brokers |
| Equity | Account value minus the margin loan |
| Buying power | How much you can buy, including borrowed funds |
| Margin interest | Charged on the borrowed amount, daily |
| Minimum equity | $2,000 to trade on margin |
A margin call, worked through
You have $10,000 and buy $20,000 of stock using $10,000 of margin.
- Loan: $10,000. Equity: $10,000 (50%).
- Maintenance requirement: say 30% of the position value.
The stock falls 25%. The position is worth $15,000, the loan is still $10,000, so equity is $5,000.
- Required equity at 30%: $15,000 × 30% = $4,500. You're still above it.
It falls further, to $14,000. Equity is $4,000, and the requirement is $4,200. Margin call.
A 30% drop in the stock produced a 60% loss of your equity. That's leverage.
Score the Setup Before You Take It
TRADZY's Void Engine rates any setup 0–100 across 12+ variables: structure, trend alignment, volume, momentum and key levels.
Score a Setup Free →What happens on a margin call
- Deposit cash or securities, or sell positions to restore equity.
- Brokers can liquidate positions without waiting, and don't have to tell you first, especially in fast markets. Some (such as Interactive Brokers) auto-liquidate in real time.
- You're responsible for any deficit if losses exceed your equity.
Intraday margin after the PDT rule
Since June 4, 2026, FINRA's pattern day trader rule is gone, replaced by an intraday margin standard: brokers monitor and prevent intraday margin deficits in all margin accounts. Brokers are phasing this in through October 20, 2027. See the PDT rule change and day trading rules in the US.
Margin in other markets
| Market | How margin works |
|---|---|
| Futures | A performance bond (initial and maintenance) set by the exchange and broker; losses settle daily. See what is futures trading |
| Forex (US) | Up to 50:1 on majors for retail |
| CFDs and spread bets (UK/EU) | Leverage caps (e.g. 30:1 majors, 5:1 shares), margin close-out at 50%, negative balance protection. See what is spread betting |
| Crypto | Exchange-specific, often very high leverage and automatic liquidation |
The costs
- Margin interest: rates vary a lot between brokers, and can quietly eat swing trading returns.
- Short borrow fees when shorting.
- Forced selling at the worst prices.
Rules for using margin safely
- Use far less than the maximum. Being able to borrow 50% doesn't mean you should.
- Size from your stop, not from buying power. See position sizing.
- Keep a buffer well above maintenance, especially in volatile stocks.
- Know your broker's house requirements. They can rise without notice during volatility.
- Avoid margin on concentrated, volatile positions or over earnings.
- Track interest costs in your journal.
TRADZY tracks drawdown and exposure across your positions, so you see how close leverage is taking you to trouble before a margin call does.
FAQ
What is margin trading in simple terms?
Borrowing money from your broker to buy more securities than your cash allows, using your account as collateral.
What triggers a margin call?
Your account equity falling below the maintenance margin requirement, usually because positions dropped in value.
Can you lose more than you invest with margin?
Yes. If losses exceed your equity, you owe the broker the deficit, though UK and EU retail CFD clients have negative balance protection.
How much margin do you need to day trade?
US margin accounts need at least $2,000. Since the PDT rule ended in 2026, intraday buying power depends on your real-time margin excess and your broker's rules.
Is margin trading a good idea for beginners?
Generally not. Learn to trade profitably without leverage first, then use margin sparingly with strict position sizing.
Put This Into Practice
- Score your next setup 0–100 with the Void Engine before entering
- Log the trade and tag the setup in the TradLog
- Review weekly: keep what pays, cut what doesn't
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Educational content, not financial advice. Trading involves substantial risk of loss.