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Lesson 9. Opening a Brokerage Account > Margin Account
Margin Account
In a margin account, the brokerage firm basically lends you money. However, you are still required to maintain in your brokerage account at least half the value of the stock that you want to purchase. A margin account enables an investor to make money faster, but be warned: It also enables an investor to lose money faster. The process by which this works is known as leverage as discussed earlier in Lesson 6, "Stock Derivatives," whereby additional money or credit is applied to an investor's purchase (or sale) of stock.
Plain English
Leverage is like a seesaw: The farther you get from the center, the greater the movement. The seats on the seesaw will go higher and lower, as will the value of the investment in larger profits and losses.
