Margin trading allows investors to borrow money from a broker to purchase securities, with the promise of repaying the loan plus interest. However, if the value of the securities declines, the investor may face a margin call, requiring them to deposit additional funds or sell securities to cover the loss. Margin calls can be stressful and costly, but they can also present opportunities for savvy investors to adjust their portfolios and manage risk.
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A margin call occurs when the equity in an investor's brokerage account falls below a certain percentage of the account's total value. This percentage, known as the maintenance margin, is typically set by the broker and can vary depending on the type of securities held in the account. When a margin call is triggered, the investor must deposit additional funds or sell securities to bring the account back into compliance. Margin trading allows investors to borrow money from