how do you buy stocks on margin: Practical Guide

This guide answers how do you buy stocks on margin — a step-by-step, beginner-friendly explanation of margin accounts, rules (Reg T), costs, margin calls, worked examples, and best practices, with ...

2026-02-03 12:16:00

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Buying Stocks on Margin

This article explains how do you buy stocks on margin and what that involves: using borrowed funds from a broker to purchase equities, the rules that govern margin accounts in the U.S., key risks (including margin calls and forced liquidation), interest costs, calculations and practical steps to open and manage a margin account. Read on to learn step-by-step procedures, worked numeric examples, regulatory context, and safe practices — plus how to start on Bitget for margin-enabled services.

Overview

Buying on margin means you purchase stocks using borrowed funds from a brokerage. The securities and cash in your account act as collateral for that loan. This guide covers how do you buy stocks on margin, how margin increases buying power, essential regulatory rules such as Regulation T (Reg T), margin interest and fees, margin calls and liquidation mechanics, examples with numbers, and practical risk-management best practices tailored for retail investors.

Note on timeliness and market context: 截至 2026-01-15，据 Benzinga 报道，Mobileye (MBLY) 在 Q4 CY2025 报告营收 4.46 亿美元、调整后每股收益 0.06 美元、市值约 88.5 亿美元；Knight-Swift (KNX) Q4 收入 18.6 亿美元、调整后每股收益 0.31 美元、市值约 89.4 亿美元。该类市场信息是背景性数据，有助于理解用保证金交易时需关注的公司业绩与波动性。

Basic Concepts

What margin is

Margin (account) — a brokerage account that allows you to borrow money from the broker to buy securities. The broker lends against the value of securities and cash in your account.
Margin (collateral / equity) — the portion of account value that belongs to you: account market value minus margin loan.
Cash account — a standard brokerage account where trades must be fully funded by available cash (no borrowing).

If you wonder how do you buy stocks on margin, the core answer is: open a margin account, meet the broker's minimum equity, and then place purchases that use a combination of your cash and borrowed funds (subject to Reg T and broker limits).

Leverage and buying power

Margin increases your buying power: with 50% initial margin you can buy up to twice the securities you could buy with cash alone (2x leverage). While leverage can amplify gains, it also magnifies losses and increases downside risk — a central reason brokers enforce maintenance requirements and may liquidate positions.

Key Terms

Initial margin: the percent of a purchase you must fund yourself when opening a position (Reg T commonly requires 50% for many U.S. equities).
Maintenance margin: minimum equity percentage you must keep in the account after the trade (often 25% but varies by broker and security).
Margin loan: the amount borrowed from the broker.
Margin call: a demand from your broker to deposit cash or securities when your account equity falls below maintenance requirements.
Buying power: the total amount you can buy, combining cash and margin borrow.
Liquidation (forced sale): broker’s sale of securities to bring your account back into compliance if you fail to meet a margin call.
Margin interest: interest charged on the borrowed funds; often tiered based on loan size.

How Margin Trading Works — Step by Step

1) Opening a margin account

Eligibility: generally available to U.S. residents and many international customers who meet broker age and identity requirements.
Application: you must apply for a margin account (separate or upgraded from a cash account) and sign a margin agreement that discloses risks and the broker’s rights.
Required disclosures: brokers will ask about investment experience and risk tolerance; they must provide a margin agreement and risk warnings.
Minimums: many brokers have a minimum to open a margin account (Reg T historically references a typical $2,000 minimum in U.S. practice, but brokers may set higher internal requirements). Confirm your broker’s exact threshold.

2) Funding and buying on margin

Funding: deposit cash or eligible securities into the margin account. The account equity and existing positions determine your initial buying power.
Buying power calculation example: with $10,000 cash in a margin account and 50% initial margin, you can buy up to $20,000 worth of marginable securities (you provide $10,000 and borrow $10,000).
Execution: place a buy order on the brokerage platform and select the margin or margin-enabled order type. The broker lends the required portion automatically if you use available buying power.

3) Repaying loans and interest

Loan repayment: when you sell positions, proceeds are used first to pay down margin loans. If you add cash, that also reduces the loan balance.
Interest: margin interest accrues on borrowed funds and is charged according to the broker’s schedule (daily accrual, monthly billing is common). Interest costs reduce net returns and compound over time.

Regulatory and Broker Rules

Regulation T (Reg T) and common U.S. rules

Reg T initial rule: Reg T typically allows brokers to extend credit up to 50% of the purchase price of marginable securities on initial purchase (i.e., you must put up at least 50% of the purchase price).
Minimum equity: Reg T historically ties to a typical $2,000 minimum to open a margin account for many retail clients; some brokerages may impose a higher minimum.

FINRA and exchange rules

Maintenance requirements: FINRA and exchanges set minimum requirements, but brokers often apply higher maintenance margins depending on risk.
Variation by security: thinly traded, highly volatile, or non-marginable securities may have higher maintenance or be excluded.

Broker-specific policies

Brokers can set stricter initial/maintenance margins, concentration limits, or position limits.
Brokers have contractual rights (in the margin agreement) to liquidate positions without prior notice and to change margin requirements.
Practice tip: read your broker’s margin agreement carefully to understand forced-sale rights and notification rules.

Types of Margin and Margin Models

Reg T margin vs. portfolio margin

Reg T (rules-based): applies standard initial 50% financing for many equity purchases; maintenance requirements are usually fixed percentages or FINRA minimums.
Portfolio margin (risk-based): evaluates overall portfolio risk and may allow greater leverage for diversified portfolios with offsetting positions; available to experienced and qualified investors who meet higher account-size and approval criteria.

Securities-financing vs. futures/commodities margin

Margin definition varies: in equities, margin commonly refers to borrowing against securities. In futures/commodities, margin is a performance deposit to cover potential daily losses. The mechanics, terminology and providers differ.

Margin Calculations and Examples

Below are numeric examples that show how leverage affects returns and when margin calls might occur.

Example A — Initial purchase and upside

Assumptions:

Cash equity: $10,000
Initial margin requirement: 50%
Purchase: $20,000 worth of Stock X (you invest $10,000, borrow $10,000)

Outcomes:

If Stock X rises 20% to $24,000, your equity becomes $24,000 − $10,000 loan = $14,000.
Your return on equity = ($14,000 − $10,000) / $10,000 = 40% gain.
Without margin, a $10,000 cash-only purchase rising 20% yields $2,000 (20%). Margin amplified the return from 20% to 40%.

Example B — Price fall and margin call trigger

Same initial setup as Example A.

Stock X falls 25% to $15,000.
Equity = $15,000 − $10,000 = $5,000.
Equity percentage = $5,000 / $15,000 = 33.3%.
If maintenance margin requirement is 25%, no margin call yet.
If stock falls again to $13,333, equity = $3,333; equity percentage = 25%; that would be the margin-call threshold. Below that, you'll face a margin call or forced liquidation.

Interest impact example

Borrowed amount: $10,000
Annual margin rate: 8% (simple illustration)
Interest cost per year: $800.

If Stock X rises 20% (gain before interest = $4,000), after interest ($800) net gain = $3,200, lowering the leveraged net return. Over longer holding periods, interest can materially reduce or negate gains.

Margin Calls and Liquidation

What triggers a margin call

A margin call occurs when account equity falls below the broker’s maintenance margin requirement. Triggers include:

Adverse price moves reducing account equity.
Increased maintenance percentages set by the broker (e.g., for volatile securities).
New positions that consume buying power.

Broker actions and customer obligations

You can satisfy a margin call by depositing cash or delivering marginable securities. Brokers may accept partial cures.
If you don't meet the call, the broker can sell any of your holdings — even profitable positions — to restore compliance.
Brokers are not required to provide extended notice before selling; most contracts grant discretionary liquidation rights.

Timeframes and partial vs. full calls

Some brokers issue a specific time window (e.g., by end of day or a few days) to cure calls. Policies vary — verify in your margin agreement.
Partial margin calls ask for enough funds to restore compliance rather than closing the entire account.

Eligible Securities and Restrictions

Marginable vs. non-marginable securities

Commonly marginable: exchange-listed stocks, ETFs, many fixed-income securities.
Commonly excluded: certain OTC stocks, penny stocks, newly issued shares, unregistered placements, some mutual funds, and restricted securities.

Special rules

Short selling: requires a margin account and often higher maintenance percentages; short positions can create unlimited theoretical losses.
Options: margin rules for options vary by strategy; uncovered options have high margin demands.
Concentrated holdings: brokers may impose higher requirements on concentrated single-stock positions.

Costs of Margin Trading

Margin interest rates

Determination: set by the broker; often tiered by loan size (larger loans may receive lower rates).
Compounding: interest typically accrues daily and is billed monthly; annualized rates produce compounding effects on long-term positions.

Other fees and effects on returns

Trading commissions and SEC/FINRA fees (if any) add to costs.
Interest reduces net returns and increases breakeven thresholds. In down markets, interest plus declines can quickly erode equity.

Comparative considerations

Rate shopping matters: different brokers charge materially different margin rates and have different minimums and maintenance rules. Compare before borrowing.

Uses and Strategies

Common uses of margin include:

Increasing exposure to an investment thesis (leveraged purchase).
Short selling (borrowing to sell first and buy back later).
Hedging: using margin to maintain liquidity while holding hedges.
Short-term liquidity strategies: borrowing against holdings for opportunistic trades.

Typical users:

Experienced traders who understand risk and can monitor positions.
Some active retail investors for short-term tactical moves.
Long-term buy-and-hold investors typically avoid margin or use it sparingly due to costs and forced-liquidation risk.

Note: this is educational information, not investment advice.

Risks and Disadvantages

Amplified losses: leverage multiplies losses so you can lose more than your initial capital.
Forced liquidation: brokers may sell positions without consent if margin falls short.
Volatility sensitivity: rapid price swings can trigger calls and outsized realized losses.
Behavioral risk: access to leverage can encourage overtrading or excessive risk-taking.

Historical cautionary notes: margin has exacerbated losses in market corrections. Retail investors should carefully size positions and plan for worst-case scenarios.

Risk Management and Best Practices

Position sizing: limit margin exposure to a small percentage of total net worth.
Use stop-losses: automate exits to manage downside (recognize stop orders may not guarantee execution at all prices).
Monitor margin ratios: track equity, market value and maintenance margin frequently.
Personal cushion: keep equity well above maintenance (e.g., target 30–40% rather than minimum 25%) so you have a buffer.
Understand the margin agreement: know your broker’s liquidation policy, rate schedule, and notification rules.
Alternatives: use options, smaller positions, or cash-only trades if you’re inexperienced.

Tax, Accounting and Reporting Considerations

Gains/losses: capital gains and losses from margin trades are reported the same as cash trades; holding period and tax rates depend on jurisdiction and timeframe.
Interest deductibility: margin interest may be tax-deductible for investment interest in many jurisdictions subject to limits and rules. Consult a qualified tax professional for personal tax treatment.
Reporting: brokerages issue tax forms summarizing sales and interest; retain records for tax filing.

How to Open and Use a Margin Account — Practical Steps

Checklist to get started:

Choose a broker that offers margin accounts and read margin agreements carefully. Bitget offers margin-enabled services for eligible users; review Bitget’s margin account disclosures and product eligibility if you prefer Bitget for trading needs.
Verify account minimums and approval criteria.
Apply for a margin account and sign the margin agreement.
Fund your account with the required minimum equity.
Confirm approval status and accessible buying power.
Place a margin-enabled buy order on the trading platform and monitor the margin balance, loan amount, and interest accrual.

Executing a margin purchase typically involves selecting the quantity and order type (market/limit) and ensuring the order is placed in the margin account (many platforms default to margin when available). Track the loan balance and interest in your account dashboard.

Frequently Asked Questions (FAQ)

Q: Can you lose more than you invest? A: Yes. Because you borrow funds, losses can exceed your initial equity if the position declines enough to wipe out equity and leave a remaining loan balance.

Q: What is a margin call? A: A margin call is a broker’s demand for additional funds or securities when your account equity falls below the maintenance requirement.

Q: How much can I borrow? A: Borrowing depends on the initial margin rule (commonly 50% for many U.S. equities under Reg T) and your broker’s buying-power calculation. Portfolio margin accounts can offer higher leverage for qualified customers.

Q: How is margin interest calculated? A: Interest generally accrues daily on the outstanding loan amount at an annualized rate set by your broker. Billing and compounding practices vary by broker.

Q: Are all stocks marginable? A: No. Marginability depends on exchange listing, price, liquidity and the broker’s policies. Check your broker’s marginable securities list.

Historical Context and Regulatory Evolution

Margin trading in the U.S. is governed in part by Federal Reserve Regulation T (Reg T), established to regulate credit extended by brokers and dealers. Over time, FINRA and exchanges introduced maintenance standards and oversight designed to reduce systemic risk. Portfolio margining and other modern risk-based approaches evolved to better align margin requirements with actual portfolio risk.

Regulation has historically tightened after market stress events to protect customers and market stability.

Appendix A: Example Worked Problems

Problem 1 — Initial purchase, price move down, margin call calculation

Start: $12,000 cash, want to buy stock at $24,000 with 50% Reg T.
Borrowed: $12,000; total position $24,000.
Maintenance margin: 25%.

Calculate price at which margin call occurs:

Let P = share price trigger, NV = market value = P.
Equity = NV − loan. Maintenance requirement: Equity / NV = 25%.
So (NV − 12,000) / NV = 0.25 → 1 − 12,000/NV = 0.25 → 12,000/NV = 0.75 → NV = 16,000.

If market value drops to $16,000 total, you hit the maintenance threshold and face a margin call. That corresponds to a 33.3% decline from $24,000 to $16,000.

Problem 2 — Interest and longer holding periods

Borrowed: $10,000 at 9% annual interest.
One-year interest cost: $900.
If the stock returns 10%, gross gain = $2,000; after interest = $1,100 net. On equity $10,000 initial, net return = 11% vs. 10% without margin interest. But over longer periods with large declines, interest accelerates losses.

Appendix B: Comparison Table (Broker Features)

Below are recommended comparison fields you should examine when selecting a broker for margin trading. (Data should be verified on broker sites and updated frequently.)

Initial margin requirements (Reg T vs. broker-specific)
Maintenance margin percentages by security class
Margin interest rate tiers and calculation methodology
Margin account minimums and approval thresholds
Portfolio margin availability and eligibility criteria
Liquidation and notification policies
Marginable securities list and concentration limits

Note to editors: update margin interest rates and broker minimums frequently. If you prefer a margin-enabled platform, Bitget provides margin services for eligible users; consult Bitget disclosures for feature comparisons.

Practical Checklist Before Using Margin

Read and fully understand the margin agreement.
Confirm how margin interest is charged and compounded.
Verify which securities are marginable and any higher-risk categories.
Start small: test with minor positions and monitor margin usage.
Keep a cash buffer or liquid securities to meet possible margin calls.

Final Notes and Next Steps

Knowing how do you buy stocks on margin is essential if you plan to use leverage. Margin can magnify returns but also escalate losses and create forced-liquidation risk. Start by understanding Reg T basics, your broker’s specific margin rules and interest rates, and by practicing strict position sizing and monitoring.

For users who want to explore margin-enabled trading with an accessible platform, consider reviewing Bitget’s margin account features and disclosures to ensure eligibility, see current margin rates, and learn how Bitget’s interface displays buying power, loan balances and interest accruals. Always consult your tax and financial advisor for personal guidance.

进一步探索：review margin agreement terms, run the worked examples above with your intended trade sizes, and check current margin rates on your chosen platform before placing margin trades. If you’d like a simplified checklist or a customized worked example for a specific trade size or stock, ask and provide the numbers — we can walk through the calculations step-by-step.

Reported market-context source: 截至 2026-01-15，据 Benzinga 报道（company financial highlights enumerated above）. This article remains educational and factual; it does not constitute investment advice or a recommendation to trade on margin.

The content above has been sourced from the internet and generated using AI. For high-quality content, please visit Bitget Academy.