: If you buy $10,000 of stock using $5,000 of your own cash and $5,000 in margin, a 25% drop in the stock price ($2,500 loss) actually results in a 50% loss of your initial $5,000 investment.
The Double-Edged Sword: Why Buying on Margin is a High-Risk Strategy why is buying on margin a risk
Unlike a standard cash account where your losses are capped at the amount you paid, a margin account can leave you in debt. If the value of your securities drops sharply, you may lose your entire initial deposit and still owe the broker the remaining balance of the loan, plus interest. 3. The Dreaded "Margin Call" Buying On Margin: The Risks And Rewards Of Margin Trading : If you buy $10,000 of stock using