What is margin trading?
Margin trading means borrowing money from your broker or exchange to buy, or short sell, more of an asset than your own cash would pay for. Your deposit and the assets you buy act as collateral for the margin loan, and you pay interest on the borrowed money for as long as the position is open.
Because you trade with borrowed funds, margin trading can amplify gains, and it amplifies losses by exactly the same amount. Most retail traders who use leveraged products lose money, and with margin you can lose more than your initial investment.
What is margin trading in practice?
Margin trading is investing partly with your own money and partly with money you borrow from the platform. The share you pay yourself is the margin; the rest is a margin loan that must be repaid when you close the trade, whatever the result.
To do it you need a margin account rather than an ordinary cash account. A margin account gives you extra buying power, also called purchasing power: with €1,000 of your own money and 2x leverage you can buy securities or crypto worth €2,000. You can use that buying power in two ways:
- Long position: borrow money to buy more of an asset you expect to rise.
- Short position: borrow the asset itself, sell it at the current price and buy it back later at what you hope is a lower price. This is short selling.
How margin trading works
Margin trading works like a secured loan: the platform lends you money, holds your assets as collateral, and sells them if their collateral value falls too far. The steps are similar at a stock broker and a crypto exchange.
- Open a margin account. The platform may ask you to pass an appropriateness test first.
- Deposit cash or assets. This is your own equity.
- Meet the initial margin requirement. The share you fund yourself, for example 50% for 2x leverage.
- Borrow and trade. The platform lends the rest. Only some assets qualify, such as marginable securities or margin-enabled coins.
- Pay interest. Margin interest accrues on the loan, often daily or hourly.
- Repay on closing. The loan and interest are paid back first; you keep what is left.
Example: €1,000 at 2x
You deposit €1,000 and borrow €1,000 to buy €2,000 worth of shares or bitcoin.
- The price rises 10%. The position is worth €2,200. You repay the €1,000 loan and keep €1,200: a 20% gain on your own money.
- The price falls 10%. The position is worth €1,800. After repaying €1,000 you keep €800: a 20% loss.
- The price falls 50%. The position is worth €1,000, exactly the loan. Your own money is gone.
Interest and transaction fees are left out here and make every outcome worse. Without margin, the same 10% fall would have cost you €100, not €200.
Initial margin, maintenance margin and margin calls
Initial margin is what you must put in to open a position; maintenance margin is the minimum equity you must keep while it is open. If your equity drops below the maintenance margin, you get a margin call: a demand to add more funds or shrink the position.
Each platform sets its own margin requirements, usually stricter for volatile assets. In the US, the Federal Reserve Board’s Regulation T lets you borrow at most 50% of the purchase price of stocks, and FINRA requires at least 25% maintenance margin. EU brokers and crypto exchanges set their own levels, so check the broker’s requirement before you start.
What happens during a margin call?
A margin call happens when falling prices push your equity below the maintenance level. Take the example above with a 30% maintenance margin: the call comes when the €2,000 position falls below about €1,429, a drop of roughly 29%, because at that point your €429 of equity is just 30% of the position.
You then have three choices: deposit cash, sell part of the position, or let the platform sell for you. That forced sale, or forced liquidation, can happen without your approval, at the worst moment, and in fast market moves before you’ve even seen the margin call. Our page on liquidation explains how this works on crypto exchanges.
Margin interest and other costs
Margin interest is the price of the loan, charged at the platform’s margin rate on the amount you borrow for as long as you hold the position. It’s the cost beginners forget, because it keeps running whether the trade is winning or losing.
Some published examples from providers we track (checked 23 October 2026):
| Provider | What you borrow for | Published rate |
|---|---|---|
| Bitvavo | Crypto margin, up to 10x on 20 assets | 0.0023% per hour, plus a 2% liquidation fee |
| Bitpanda | Crypto margin trading | 0.18% per day funding, 0.3% closing fee |
| Scalable Capital | Securities-backed credit up to €250,000 | 3.75% a year with PRIME+, 4.75% without (variable) |
The units matter. Bitvavo’s 0.0023% an hour adds up to about 0.055% a day: borrowing €1,000 for 30 days costs roughly €16.56, and over a full year the interest rate comes to about 20%. A securities-backed loan at 4.75% a year costs about €47.50 on €1,000. Add trading fees on the full position, and interest charges make holding a trade for weeks expensive.
Crypto margin trading: how does it work?
Crypto margin trading works the same way: a cryptocurrency exchange lends you euros, stablecoins or coins so you can open a bigger long or short position on the spot market. Because crypto prices are far more volatile than shares, the same leverage carries much more risk.
On MiCA-licensed platforms, EU residents can use cryptocurrency margin trading at, for example, Bitvavo (up to 10x on 20 assets), OKX Europe (spot margin up to 10x on BTC and ETH against USDC since December 2025) and Bybit EU (spot margin). Global platforms that advertise much higher leverage are often not licensed for EU residents. Crypto margin trading differs from futures, where you trade a contract instead of borrowing to buy the coin, but both are forms of leverage.
Isolated margin vs cross margin
Crypto exchanges let you choose how much of your account backs each trade. With isolated margin, only the margin assigned to one position is at risk; with cross margin, your whole account balance backs all open positions.
| Isolated margin | Cross margin | |
|---|---|---|
| Collateral | Only the margin you assign to that position | Your whole margin account |
| Worst case | You lose that position’s margin | Losses can eat into all your funds |
| Liquidation | Comes sooner, but stays contained | Comes later, but can hit several positions at once |
| Suits | Beginners and single trades | Experienced traders running several positions |
Cross margin trading keeps a position alive longer, which sounds good until one bad trade drags down everything else. Isolated margin trading caps the damage per trade, so start there.
Why margin trading is high risk
Margin trading is high risk because leverage magnifies losses, interest keeps running, and the platform can sell your assets when prices drop. A fall that a spot investor could wait out can force you out of the market with a permanent loss.
- You can lose more than you put in. If prices gap past your liquidation level, the sale may not cover the loan and you owe the difference, unless the provider offers negative balance protection.
- Forced sales lock in losses. You lose the option to wait for a recovery.
- Most retail traders lose money. EU brokers selling leveraged CFDs must publish the share of retail accounts that lose money; at the brokers we track it ranges from 55% to 78.5%.
The EU’s CFD rules (leverage caps, a 50% margin close-out and negative balance protection) apply to CFDs sold by investment firms, not automatically to a margin loan on a crypto exchange. Read the provider’s risk disclosure first.
Margin trading vs spot trading
In spot trading you pay the full price and own the asset outright; in margin trading part of the purchase is borrowed. Spot trading can never trigger a margin call, so a 50% crash hurts but doesn’t force you to sell.
For most readers, especially those investing €50 to €500 a month, spot buying or an ETF savings plan does the job without debt. Margin trading may suit experienced margin traders with a clear plan, strict risk management and a high risk tolerance. If you do use margin, start with low leverage, set a stop-loss and check your margin level daily. Our margin trading guide goes deeper.
The bottom line
Margin trading lets you buy more than you can afford by borrowing against your own assets, and that cuts both ways. Treat it as a high-risk tool for experienced traders: check the provider’s licence where you live, know your maintenance margin and interest rate before you buy, and never risk money you can’t afford to lose.
Questions people ask
Is margin trading a good idea?
For most people, no. It can amplify gains, but it amplifies losses just as much and adds interest costs, so it only suits experienced traders with a tested plan and money they can afford to lose.
Can you lose more than you invest with margin trading?
Yes. If the price falls faster than the platform can sell, the sale may not cover your loan and you owe the rest. EU brokers must give retail CFD clients negative balance protection, but margin loans on crypto exchanges are not automatically covered.
Is margin trading illegal?
No. Margin trading is legal in the EU, the UK and the US, but only licensed firms may offer it, and many restrict it to clients who pass an appropriateness test. In the EU, use a broker licensed by a national regulator or, for crypto, a platform with a MiCA licence.
How does margin get paid back?
The loan is repaid when you close the position: the platform takes the borrowed amount plus interest from the sale proceeds and you keep the rest. You can also reduce the loan early by depositing cash.
Is it better to trade on margin or cash?
Cash is the better choice for most investors, because you can't get a margin call and you pay no interest. Margin only makes sense if you understand the risks and could cope with losing your whole stake.