Margin trading allows investors to borrow money from a brokerage to trade securities, using their own funds as collateral. This strategy enables investors to leverage their investments, potentially increasing returns but also amplifying risks.

• Initial Margin Requirement: To open a margin position, investors must deposit a minimum amount of their own funds, known as the initial margin, which is a percentage of the total trade value. For example, with a 50% initial margin requirement, an investor with $5,000 can buy $10,000 worth of securities.
• Maintenance Margin: After the trade, investors must maintain a minimum equity level, called the maintenance margin. If the value of the securities declines and equity falls below this threshold, a margin call occurs.
• Margin Call: A margin call demands that the investor deposit additional funds or sell securities to restore the required equity level. Failure to meet the margin call may result in the broker liquidating assets to cover the shortfall.

• Leverage: Margin trading allows investors to control larger positions with less of their own capital, potentially amplifying returns.
• Increased Capacity: It provides the ability to take larger positions or diversify investments.

• Amplified Losses: Margin trading can magnify losses, potentially exceeding the initial investment.
• Interest Costs: Borrowing funds incurs interest, which can erode profits.
• Margin Calls: Market downturns can lead to margin calls and forced liquidation of assets.

Margin trading can enhance investment opportunities but requires careful management of risks and understanding of margin requirements and costs.