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Um, one of the biggest. Pros Let's look over to the screen here on a large stock like Tesla When you have a smaller account and you're trading a stock that's very expensive, most of the time you're not going to take that many shares. And since they move so slow and have such little range, even maxing out your account size may only be a fraction of the risk that you would like to take on slow removing stocks, margin can be a way to take advantage of moves that you find predictable with larger size because they move so slow and you can still keep your risk in check. However, margin trading since you're using money that isn't your own, can also lead to faster and larger than expected losses.

Take a look at Prst. This is a very fast mover up over 200 percent today. If you had bought this at the very top right here and then sold right here on a margin account, you would have likely lost a lot more of your money than you would have liked to. You might have even blown up the account.

It's really important to know what stock you're trading and to understand how much margin you want to use and to always keep your risk in check.

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One thought on “The pros and cons of margin trading”
  1. Avataaar/Circle Created with python_avatars Barb ODELL says:

    Danger! Danger! Will Robinson. Margin Account. Stock rising! Good reminder. Thanks Bryce

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