Margin Trading Overview
What is Margin Trading?
There are two margin definitions. Securities margin is borrowing money to buy stock. However, commodities margin involves putting in your own cash as collateral for the contract.
View InfographicBenefits of a Margin Trading Account
Use the cash or securities in your account as leverage to increase your buying power.
Get the lowest market margin loan interest rates of any broker.
Diversify trading strategies with short selling, options and futures contracts, or currency trading.
Borrow against a margin account at any time and repay the loan on your own schedule.
Understand the Risks of Margin Trading
Margin borrowing is only for experienced investors with high risk tolerance.
You may lose more than your initial investment.
Before trading on margin, understand the following risks
- Trading losses may be greater than the value of the initial investment
- Leveraged investments create a greater potential risk of loss
- Additional costs from margin interest charges
- Potential margin calls or liquidation of securities
How Trading Securities on Margin Works
Rules-based vs. Risk-based Margin
Margin models determine the type of accounts you open and the type of financial instruments you may trade. Trading on margin uses two key methodologies: rules-based and risk-based margin.
- In rules-based margin systems, your margin obligations are calculated by a defined formula and applied to each marginable product. This is the more common type of margin strategy used by securities traders.
- In risk-based margin systems, margin calculations are based on the risk inherent in your trading portfolio. The positions in your account are evaluated, including any hedged positions that decrease potential risk, and based on their risk profile, used to create your margin requirements.
shares @ $40 (50 shares with cash and 50 shares on margin)
Rated Lowest Margin Fees1 by StockBrokers.com
US Margin Loan Rates Comparison2
| $ 25K | $ 300K | $ 1.5M | $ 3.5M | |
|---|---|---|---|---|
| Interactive Brokers | 6.83% | 6.50% | 6.28% | 6.17% |
| E-Trade | 13.70% | 12.20% | N/A | N/A |
| Fidelity | 13.08% | 11.83% | 9.25% | 9.25% |
| Schwab | 13.08% | 11.83% | N/A | N/A |
| Vanguard | 13.25% | 11.75% | N/A | N/A |
Each firm's information reflects the standard online margin loan rates obtained from their respective websites. Competitor rates and offers subject to change without notice. Services vary by firm.
Margin Education Course on Traders' Academy
Introduction to Margin Trading
- Getting Started
- Securities Margin Trading in the US
- Commodities Margin Trading in the US
- Margin in Practice Part 1: Trader Workstation (TWS)
- Non-US Margin Trading
Start trading like a professional today!
Open an AccountDisclosures
- According to StockBrokers.com Online Broker Survey 2023: Read the full article Online Broker Reviews, May 18, 2023. "Professionals can take advantage of industry-leading commissions, including the lowest margin rates across all balance tiers."
- Annual Percentage Rate (APR) on USD margin loan balances for IBKR Pro as of September 12, 2023. Interactive Brokers calculates the interest charged on margin loans using the applicable rates for each interest rate tier listed on its website. Learn more about margin loan rates.