Smart position sizing & risk management

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Account & Regulation

Margin

Borrowed money from your broker to trade larger positions. Amplifies both gains and losses.

What is Margin?

Margin is money borrowed from your broker to buy securities. A margin account lets you trade with more capital than you actually have. Standard margin is 2:1 for overnight positions, 4:1 for day trades (with $25K+).

Example

With $25,000 and 4:1 day trading margin, you have $100,000 in buying power. But if a trade goes against you, losses are amplified the same way.

Margin call

If your account value drops below the maintenance requirement (usually 25%), you'll receive a margin call: requiring you to deposit more funds or close positions immediately.

Related Terms

PDT Rule

FINRA's former Pattern Day Trader rule required a $25,000 minimum for active day trading. Overhauled April 2026: the $25K floor is gone, replaced by a $2,000 margin minimum and real-time intraday margin.

Short Selling

Selling borrowed shares to profit from a price decline. Buy them back cheaper to close the trade.