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Margin Trading

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Description

The practice of borrowing money from a broker to purchase an investment, thereby amplifying both potential gains and losses.

Margin trading involves using borrowed funds from a broker to purchase securities, allowing traders to increase their market exposure beyond what their own capital would permit. This leverage can magnify returns but also increases the risk, as losses can exceed the initial investment. Traders must maintain a minimum margin level to keep their positions open, with the broker having the authority to issue margin calls or liquidate assets if this level isn’t maintained.

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