What is margin trading? Complete explanatory guide 🚀

Basics of Lending 🔍

Financing is a system where investors and securities companies pool their money together to buy stocks. The purchased stocks serve as collateral.

The appeal is being able to ride the waves of stock price fluctuations with a small amount of money. However, both profits and losses can become significant. It could be a dangerous tool. Use it cautiously.

Money costs 📊

There is an interest burden. Calculated daily. The lending interest rates in the securities market range from about 4.5% to 6.65% per year. In 2025, it seems that many are setting interest rates close to the upper limit due to a high interest rate environment.

The formula is as follows: Loan interest = Loan amount × Annual interest rate × Number of days borrowed ÷ 365

There are good things too 📈

1. You can make large transactions with a small amount of capital.
2. Investment options are expanding

By the way, the convertible bond market has seen tremendous growth this year. It is also being used for corporate financing, attracting a lot of attention. 🌕

Scary Place ⚠️

1. The risk of forced settlement. If the stock price drops too much, the brokerage will sell it without permission.
2. Interest eats away at profits. The longer you hold, the more interest accumulates.

Risk Avoidance Methods 🛡️

Keep a close watch on stock prices and maintenance rates. Keep extra cash on hand. You should carefully choose your investment targets and the timing to buy.

Investment Strategy 💡

Choose good stocks. Set a stop-loss line. Buying gradually to lower the average cost.

Margin Trading 📉

Short selling involves borrowing stocks to sell them, and then buying them back when the price drops. The difference is the profit.

Points to be careful about:

1. There is a deadline
2. Possibility of Forced Settlement
3. The Fear of Short Squeeze

It feels like market regulations are getting stricter. A new reporting system is said to start in January next year. 🔥

Summary 🎯

Margin trading is a tool that enhances investment effectiveness. But it is a double-edged sword.

If used well, it can increase returns. But the risks are also significant. In 2025, institutional investors seem to be interested in hybrid assets, and the use of such tools appears to be increasing. Personally, I feel it's a bit difficult for beginners. 🚀