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Margin Trading

Margin Trading

Margin trading lets you trade a financial asset using borrowed funds from a broker. Assuming you believe an asset will increase in value in the near future, but you do not have ready funds amounting to its value, margin trading allows you to borrow. Let’s say you want to buy forex worth US$4000, but you only have US$2000 available. Through margin trading you can borrow US$2000 from a broker to reach the US$400 required amount. If your sentiments were correct and your US$4000 grows to US$6000, you would have made a profit of $2000 and also able to return to the lender $2000. If instead the value of the financial assets goes down you make a loss, and still you will have to pay the lender their money first before you can access funds.

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