Orders and trading · updated October 21, 2026
What is margin and how does a margin account work
Margin is the part of the money you put up yourself when you open a position bigger than your balance, with the broker lending the rest. A margin account lets you borrow money using your shares as collateral.
Margin formula
- Initial margin
- How much you must put up at the start (for example 50% for US stocks, under Regulation T).
- Maintenance margin
- The minimum percentage you must keep while the position is open (usually 25-30%).
- Loan
- The money the broker lends you, on which you pay interest.
Worked example
You buy $10,000 of stock: $5,000 is yours, $5,000 is borrowed. The price falls 30%.
The price fell 30%, but you lost 60% of your money. If the minimum margin is 30%, you get a margin call.
How to read margin
Margin is not a fee but your collateral. Interest on the borrowed part is charged separately, daily or monthly.
When margin can fool you
Forced sale: if you do not add money in time, the broker sells when it wants, usually at bad prices. Interest: on a loan held for a year, interest can eat the whole gain. "Margin" has two meanings: a company's profit margin is something else entirely.
Related terms
Learn it in the Academy
Questions about margin
What is a margin account?
A brokerage account in which you can borrow money to buy more or to sell short. An ordinary account with no borrowing is called a cash account.
How much does buying on margin cost?
You pay interest on the amount borrowed. The rate varies a lot between brokers and follows central bank rates.
These explanations are for information only. They are not a recommendation to buy or sell.
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