The way it works is, if an investor wants to buy $10,000 worth of stock but has only $5,000, they can use margin trading to borrow the remaining $5,000. If the stock price rises by 20%, the ...

If the $50 stock you bought falls to $40 after a year, your loss would have been $1,000 without buying on margin — $4,000 ending value minus $5,000 initial investment.

Margin trading allows investors to borrow money from a brokerage to increase buying power. While it offers the potential for larger returns, it also increases the risk of losses that can exceed ...