when buying on margin investors borrow funds from a broker and then combine those funds with their own in order to purchase a greater number of shares and if all goes well earn a greater profit this is known as leveraging their position 
the two primary types of brokerage accounts used to buy and sell financial assets are a cash account and a margin account in a cash account the investor can only spend the cash balance they have on deposit and no more for example if a person has 2 000 in their cash account they can only buy securities worth a total value of 2 000 unless they add more money to the account a margin account allows the investor to borrow money from the broker to purchase additional shares or in the case of a short sale to borrow shares to sell in the market in order to borrow money the investor pledges cash or securities already in their margin account as collateral for example an investor with a 2 000 cash balance might want to purchase shares worth 3 000 their broker could lend them the other 1 000 through a margin account with the investor putting up 2 000 in cash in this case the debit balance would be 1 000 