Introduction to Margin Trading

May 14, 2020

Margin trading refers to the process of borrowing funds from TradeStation in order to leverage your available capital to trade stocks and options. Margin accounts are required if your trading will include short-selling stock or writing options, and you must open a margin account with at least $2,000.

Margin trading can only be accomplished in an account known as a margin account, which is different from a cash account. While stocks and options can be purchased in either cash or margin accounts, short sales of stock can only be traded in a margin account.

Margin trading incurs interest charges and these charges are debited from your account. Normally it is used for shorter-term trading as the longer you hold a position the greater the cost which can reduce the overall return on an account.

Margin trading involves increased risk, and is regulated by the Federal Reserve Board, the New York Stock Exchange (NYSE), and the Financial Industry Regulatory Authority (FINRA). Each brokerage firm also maintains margin policies that are in the best interest of the brokerage and their clients.

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