Trading on Margin: Amplification of Gains and Losses
Margin trading allows traders to amplify their purchasing power by borrowing funds from a broker or an exchange platform. The goal is to increase the size of positions and, consequently, potential gains. The "Margin" represents the initial capital that the user deposits as collateral to obtain these borrowed funds. For example, with a margin of $1,000, a platform can lend an additional $4,000, thus allowing to open a position worth a total of $5,000.
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Trading on Margin: Amplification of Gains and Losses
Margin trading allows traders to amplify their purchasing power by borrowing funds from a broker or an exchange platform. The goal is to increase the size of positions and, consequently, potential gains. The "Margin" represents the initial capital that the user deposits as collateral to obtain these borrowed funds. For example, with a margin of $1,000, a platform can lend an additional $4,000, thus allowing to open a position worth a total of $5,000.