What is Margin?

This is where your broker gives you a loan based on the equity in your account. Margin basically doubles your trading dollars with stocks and index funds. A 5% gain turns into a 10% gain if you use some of that extra trading money. If you have a bad trading system, you will lose money twice as fast. If you have a good system, you will make money twice as quick. Most brokerages need $2000 to initially start up a margin account.

New margin rules: The SEC mandates that if you are a "pattern daytrader", you must have $25,000 in your account. The definition of a pattern daytrader is not very specific, so you might want to talk to your broker about this.

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