Risks associated with margin trading

Margin trading involves borrowing money from a broker to invest in securities. While it can generate higher returns, it also comes with significant risks.

One of the biggest risks of margin trading is the potential for losses that exceed your initial investment. If the value of your securities drops below a certain point, you may be forced to sell them at a loss to repay your loan.

Another risk is that margin calls can occur, which means your broker may demand additional funds if the value of your securities declines. If you are unable to meet this demand, your broker may sell some or all of your securities to repay the loan.

Margin trading also requires careful monitoring and management. You must be aware of market conditions and adjust your positions accordingly. Failure to do so can result in significant losses.