Margin lets you trade with borrowed money by using your own capital as collateral. It increases your exposure without fully paying for the position upfront.
This boosts potential gains, but it also magnifies losses. If prices move against you, losses eat into your capital faster than with unleveraged trades.
Margin directly increases risk. Even small price moves can have a big impact when borrowed money is involved.
It also introduces forced mechanics. Falling prices can trigger margin calls or forced liquidation, which can accelerate losses and increase volatility during market stress.
Margin is typically assessed through:
- Initial margin: Capital required to open a position
- Maintenance margin: Minimum equity needed to keep it open
- Margin ratio: Borrowed funds relative to own capital
- Falling equity increases the chance of a margin call
Lower buffers mean less room for error.
A common mistake is using margin during volatile phases without accounting for downside speed. Losses can compound faster than expected.
Another error is confusing margin availability with safety. Just because margin is offered does not mean the position fits your risk tolerance.
On Stoxcraft, margin is covered in Academy content focused on risk management and trading mechanics.
It’s also referenced in market analysis explaining leverage, margin calls, and why leveraged positions can unwind quickly in unstable markets.
