Angie · learn

Margin

Borrowing from your broker to buy more than your cash allows. It multiplies gains, losses and the chance of being forced to sell at the worst moment.

Updated 2026-09-05

Margin is borrowing from your broker against your existing holdings in order to buy more. It multiplies whatever happens next, in both directions.

The mechanism that ends accounts is not the interest, it is the margin call. As the position falls, the loan stays fixed while the collateral shrinks, and past a threshold the broker requires more cash or sells your position for you. That forced sale happens at the bottom by construction, because the bottom is what triggered it.

Leverage converts a survivable max drawdown into a terminal one. A 40 percent fall is painful unleveraged and is a wipeout at two-to-one, and the difference is not skill or analysis. It is only the borrowing.

See also

  • Short selling — Borrowing shares, selling them, and buying them back later. The gain is capped at 100 percent and the loss is not capped at all.
  • Max drawdown — The deepest fall from a peak before a new peak was reached. The number that decides whether a strategy is one you could actually hold through.
  • Volatility — How much a price moves around, usually stated as annualised standard deviation. It is a measure of variability, not of danger, though the two often coincide.

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Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.

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