No discussion about day trade margin would be complete without taking the time to quickly define margin as it applies to trading accounts – be it stock, treasuries, or leverage forex accounts. To those new to trading with a leverage forex account or other amplified trading account: trading with leverage is extremely risky and can provide very high returns if executed well. Two things to consider before beginning are having enough capital to satisfy your broker’s account requirements, and how to setup your account to avoid a call on the account or worse: a default situation on a trade – resulting in liquidation of the collateral assets of the trader.
Day trade margin really is too broad a term – as there are several layers of account protection for both the trader and the broker. The broker establishes the rules for the day trade margin account and the trader funds it with cash, securities and or other collateral to ensure the ultimate liquidity of the trader’s positions should things go horribly wrong on his or her trades. Continue reading ‘Day Trade Margin – The Basic Definitions of Purchasing Stock on Margin’ »