Margin Account

[cdpptwsk58]

I am thinking about opening up a Margin account, and have been debating it for a while now. Anyone have any drawbacks to opening one? Anyone have any horror stories buying on margin?

[CharlesPiz]

Sorry, Leo. Your post seems to have gotten buried. The biggest risk with margin is that you can lose more money than you've put into your account. Or course there are going to be horror stories out there. Just be sensible with your trades. Keep your margin usage low. You max it out, and one horrendously bad trade can wipe out your entire account.

[CharlesTag]

Like was stated you are leveraging your risk as well as your gains. And there is the interest charged. Other than that I love it. It enables me to move in and out of positions as I want to and I can trade option spreads, which allows me to spread my risk around much further than a cash only would. I only take on 2-500$ risk per spread and since it's leveraged I can spread that around even further. I stick to the "trade small, trade often" philosophy so it works pretty good for me.

[cikewulohm]

If you are going to open a margin account that means you are going take risk for your whole life.. Margin account eats money than your investment.. Try to avoid it..

[admin]

Just because one opens a margin account does not mean they have to buy using margin. So not sure where your whole "take risk for life" statement came from. All a margin account does is allow you to use funds again before they have settled. Is there risk, yes if you start buying with the banks money. If you are just using your cash in the margin account then by no means is there any more risk involved then with a cash only account

As well I can see you do not have a margin account as the funds you have not used are actually drawing dividends as the firm is using that money in other parts of their business. Just last year from E*Trade alone the dividend was $154. So your money is making money for you. Its called a sweep account. They take unused funds from your account and move them into "their" account to be used for other purposes. Is that money delayed in any way, no. It is still there and can still be used for purchases as well as withdrawal. Its just like a savings account.

If using a US based broker then you do have to comply with the FINRA regs which requires you to have 25K in the account if you plan on day trading. If not then you are only allowed 3 day trades within a 5 "business" day rolling window.

Just like everything else playing with the banks money involves risk. But if you stick to playing with the houses money there is no inherent risk then any other account