Margin Accounts

A margin account allows you to borrow money to start trading. The broker acts as a lender, and the borrowed funds allow for larger trades and more advanced trades, such as short-selling a stock. The investor pays interest on the loaned amount of money. The brokerage may demand an immediate deposit of funds from an investor if the value of their account drops below a specific level because of market changes.

Margin accounts can also be discount or full-service brokerage accounts. While a margin account offers you more flexibility, there is some risk involved. If you are new to investing, it's best to stick with a cash account at first.