20/06/2022
What is a Margin Account and how does it work ?
A margin account is an account from the Broker, where the trader borrows money from the broker to purchase the instrument that the trader is willing to trade in. The collateralization of the loan is done from the instruments purchased and cash. This loan is loaded with a periodic interest rate.
But , we need to understand , if the instrument that the trader is trading appreciates beyond the interest rate that is levied on the loan, One can make serious profits as compared to when the traders trader trades with his own money.
So , we can say that there are chances of very high gains but also great losses are also not avoidable , if the instrument’s value decline and trade incurs a loss, we would not only make a loss but also will be liable to pay the interest till the time the loan stands.
It is a mandatory that the equity in the Margin account must always be higher than the maintenance margin level.
A margin account is an account from the Broker, where the trader borrows money from the broker to purchase the instrument that the trader is willing to trade...
