Glossary_hero_D_3x

Glossary

Margin

Definition

The amount of equity (collateral) required for an investment position, as a percentage of the current value.

When trading on margin (also called gearing or leveraging), you only need to deposit a fraction of the current value of the instrument you are investing in.

For example, if the commodity you are trading in requires a margin of 5%, this allows you to leverage (or gear) your investment 20 times. In other words, a deposit of USD 10,000 can hold a position of USD 200,000.

What is margin?

Margin in trading refers to borrowing money from a broker to purchase stock or other securities. It allows traders to buy more stock than they'd be able to with their own funds alone. Margin trading amplifies both potential gains and potential losses.

Why is margin important to consider when trading?

Margin trading is important as it can significantly increase an investor's purchasing power and potential returns. However, it also increases risk, as losses can exceed the initial investment. Understanding margin requirements and the risks involved is crucial for traders, especially in volatile markets.

Put this into Practice

    Disclaimer

    The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

    Please read our disclaimers:
    Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
    Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)

    Saxo Bank A/S (Headquarters)
    Philip Heymans Alle 15
    2900
    Hellerup
    Denmark

    Contact Saxo

    Select region

    International
    International

    Trade responsibly
    All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

    This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

    Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.