A margin account is a type of brokerage account that allows you to buy securities with borrowed funds. This ability to use leverage means that you can control positions with less money than would be required in a cash account. With a margin account, you can borrow funds against their existing assets to buy additional securities. Margin accounts offer greater flexibility and potential for higher returns but also come with higher risks.
Margin accounts enable you to potentially earn higher profits, but they also amplify losses. If the value of securities held in a margin account drops significantly, you may be required to deposit more funds or sell assets to cover the losses. This process is known as a margin call.
Margin accounts allow you to short stocks, meaning you can sell stocks you don't own with intentions to buy them back at a lower price. This strategy can be used to profit from a decline in a stock's price.