Forex

By using margin you borrow money against the securities in your
investment account, then you invest that money into more securities,
and then you pay interest on the money you borrowed against
the securities you own. If your securities drop in value by 50 percent
or more, your broker will call you for additional cash to put
into your account. The cash is in your checking, savings, or money
market account. Remember that this is the cash you need for your
other commitments. That is why it’s not in your investment
account in the first place. You cannot afford to lose any more

money. You simply do not have it. However, your broker tells you
to send more cash or he or she will have to sell the securities you
own by 11 A.M. tomorrow. It’s some choice you have. This is exactly
why the dictionary defines the word margin as something
beyond what is needed. In a situation like this, it is definitely
beyond what is needed. So is margin. If the securities your broker
sold do not cover the amount you borrowed, then you have a loan
to pay off. And theoretically, you can end up with no securities, no
money, and a debt.
Did you know that margin is one of the biggest and most profitable
concerns at brokerage houses? Have you ever seen a
prospectus from an online broker? Their entire business rests on
customers who make use of margin. It is their objective to make
you use your margin. They borrow money at a much better rate
than you do, and just like the credit card companies, they make
money on the difference between what they pay for funds and
what they charge you for them. If this is good for them, it must be
bad for us. There is no mutual benefit here. Margin is like a cancer
eating away at your principal and substantially increasing the risk
of your long-term survival as an investor.