Margin stock trading is a facility that customers can get from a securities company.
Of course, margin trading can make it easier for traders to invest. Small capital investors are the most benefited by this margin facility.
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What is Margin Stock Trading?
In investing, you must be after a profit. In order to get it, you can use various safe strategies.
If you join a securities company or commonly known as a broker, then your investment will definitely be more targeted. Securities companies provide various facilities that will make it easier for you to invest.
Margin trading is one of the services that many securities companies provide to their customers.
They provide an injection of funds in the form of loans to their customers to give shares in large quantities.
That way, margin trading shares can also be interpreted as a capital loan. The goal is of course so that investors with limited capital can also get bigger profits.
The scheme of this margin itself is like any other loan. If the capital loan is due, the investor must repay the margin debt by depositing funds into his account.
In addition, investors are also obliged to pay interest on the loan. Share ownership will be automatically liquidated if the investor is unable to pay or defaults.
Each securities company also has different policies regarding the margin limits they offer.
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Terms of Using Margin Trading
The first thing you do to get margin trading stocks is to know the securities company that provides them. This is because not all brokers provide margin facilities.
After that, you can understand the terms and conditions. Don’t forget to know what stock will be the collateral. After that, you can immediately meet the requirements of the existing portfolio.
Advantages and disadvantages
Every right has advantages and disadvantages. Using the stock margin trading facility that a securities company can actually provide the following benefits:
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- Can avoid suspend buy when you have not paid your post-trading obligations at the broker.
- Holding period becomes more flexible.
- The facility fee you pay is also lower because it is different from a regular account. Margin fines are only 0.05% per day.
- Increase the potential profit by buying shares in large quantities from the available funds. Of course it will be profitable if the price continues to rise with steady fluctuations.
As for the losses that haunt you, such as the risk of capital loss and default. Capital loss can occur at any time because stock investment instruments are very risky.
Stocks that were initially promising could fall at any time. If that is the case, then a capital loss will occur and you will experience a loss.
If you have lost, then the risk of failure to pay margin trading shares is also high. Finally, your stock assets will be frozen by the investment broker.