# Margin

> Margin is the deposit you put up to borrow money or open leveraged positions. Learn initial and maintenance margin, margin calls, interest and how to avoid them.

Source: https://learn.tradelabsai.com/markets/margin/  
Track: Markets and Instruments · Level: Beginner · Updated: 2026-10-03  
Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice.  
Cite as: TradeLabs Learn, "Margin", https://learn.tradelabsai.com/markets/margin/

Margin is money you put up as a deposit so that you can borrow from your broker or open a leveraged position. In a stock margin account, margin lets you buy more shares than your cash alone would allow. In futures, forex, CFDs and crypto derivatives, margin is the collateral that backs your position. In both cases, if losses eat into your deposit, you may be asked to add money or have positions closed. That request is a margin call.

## Two meanings of margin

| Context | What margin means |
|---|---|
| Stock margin account | A loan from your broker to buy securities, secured by the securities and cash in your account |
| Futures, forex, CFDs, crypto | A good faith deposit that covers potential losses on a leveraged position, not a loan |

## Stock margin in the United States

Under the Federal Reserve's Regulation T, you can generally borrow up to 50% of the purchase price of eligible stocks, so $10,000 of your own money can buy up to $20,000 of stock. That 50% is the **initial margin**. FINRA rules then require you to keep at least 25% equity in the account at all times, the **maintenance margin**, and many brokers set higher levels, often 30% to 40% or more for volatile stocks.

**Example: How a margin call happens**
You buy $20,000 of stock with $10,000 of your money and $10,000 borrowed. Your equity is $10,000, or 50%.
The stock falls 30% to $14,000. You still owe $10,000, so your equity is $4,000, about 29% of the position.
If your broker's maintenance requirement is 30%, you receive a margin call: deposit cash or sell shares to restore your equity. Without margin, the same fall would have cost you $3,000, or 30%. With it, you lost $6,000, 60% of your money.

You also pay **interest** on the borrowed amount, which can be significant for positions held for months.

## Margin for futures and other derivatives

For leveraged derivatives, margin is set as a fraction of the position's value:

- **Initial margin** is what you need to open the position.
- **Maintenance margin** is the minimum you must keep. Drop below it and you must top up.

Futures accounts are settled every day, so gains are added and losses deducted from your cash each evening. See [Futures Margin: Initial and Maintenance](https://learn.tradelabsai.com/futures/futures-margin/) and [Mark-to-Market](https://learn.tradelabsai.com/markets/mark-to-market/). Forex and CFD brokers express margin as a percentage or a leverage ratio, such as 3.33% margin for 30:1 leverage. See [Leverage and Margin in Forex](https://learn.tradelabsai.com/forex/leverage-and-margin-in-forex/).

## What happens in a margin call

1. Your account equity falls below the maintenance requirement.
2. The broker notifies you, sometimes with a short deadline.
3. You deposit funds, close positions or both.
4. If you do not act in time, or if markets move fast, the broker can sell your positions **without asking you**, at whatever price is available.

In fast markets, many brokers and crypto exchanges liquidate positions automatically the moment margin runs out. See [Liquidations in Crypto](https://learn.tradelabsai.com/crypto/liquidations-in-crypto/).

## How to avoid margin trouble

- **Use far less than the maximum.** Keep a large cushion between your equity and the maintenance level.
- **Size positions from risk**, not from available buying power. See [Position Sizing](https://learn.tradelabsai.com/risk/position-sizing/).
- **Use stop losses** so losses are taken by your plan, not by a forced liquidation.
- **Watch concentration.** One volatile stock on margin can trigger a call by itself.
- **Know your broker's rules**, including higher requirements for volatile or low priced stocks and changes around major events.

**Watch out: Margin can turn a bad trade into a disaster**
Without margin, a stock that falls 50% costs you half your investment. With 2:1 margin, the same fall wipes out your entire equity, and you still owe the loan if losses go further.

## Frequently asked questions

### Is trading on margin a good idea?

For most beginners, no. Margin magnifies losses, adds interest costs and can force sales at the worst time. Experienced traders use it sparingly with strict risk rules.

### What is the difference between margin and leverage?

Margin is the deposit you put up; leverage is the ratio of your position size to that deposit. Lower margin requirements mean higher available leverage.

### Can a broker sell my shares without telling me?

Yes. Margin agreements generally allow brokers to sell securities to meet a margin call, and they may do so without prior notice in fast markets.

## Sources

- FINRA, [Margin accounts](https://www.finra.org/rules-guidance/key-topics/margin-accounts)
- U.S. Securities and Exchange Commission, [Margin](https://www.investor.gov/introduction-investing/investing-basics/glossary/margin-account)

## Continue learning

- Next lesson: [Hedging](https://learn.tradelabsai.com/markets/hedging/)
- Previous lesson: [Leverage](https://learn.tradelabsai.com/markets/leverage/)
- Related: [Leverage](https://learn.tradelabsai.com/markets/leverage/): Leverage lets you control a larger position with less money. Learn how leverage ratios work, how they magnify gains and losses and how to use leverage safely.
- Related: [Futures Margin: Initial and Maintenance](https://learn.tradelabsai.com/futures/futures-margin/): Futures margin is a performance bond, not a loan. Learn initial and maintenance margin, day trading margin, margin calls, SPAN and how to avoid forced liquidation.
- Related: [Leverage and Margin in Forex](https://learn.tradelabsai.com/forex/leverage-and-margin-in-forex/): Forex brokers offer high leverage through margin. Learn how margin is calculated, regulatory limits, margin calls and stop outs, and how to use leverage safely.
- Related: [Account Types and Margin Rules](https://learn.tradelabsai.com/industry/account-types-and-margin-rules/): Cash, margin, portfolio margin and retirement accounts follow different rules. Learn Regulation T, maintenance margin, settlement and good faith violations.
- Related: [Liquidations in Crypto](https://learn.tradelabsai.com/crypto/liquidations-in-crypto/): A liquidation is the forced closing of a leveraged crypto position when margin runs out. Learn how liquidation prices work, cascades, heatmaps and how to avoid them.