what is margin 
in finance the margin is the collateral that an investor has to deposit with their broker or exchange to cover the credit risk the holder poses for the broker or the exchange an investor can create credit risk if they borrow cash from the broker to buy financial instruments borrow financial instruments to sell them short or enter into a derivative contract buying on margin occurs when an investor buys an asset by borrowing the balance from a broker buying on margin refers to the initial payment made to the broker for the asset the investor uses the marginable securities in their brokerage account as collateral in a general business context the margin is the difference between a product or service s selling price and the cost of production or the ratio of profit to revenue margin can also refer to the portion of the interest rate on an adjustable rate mortgage arm added to the adjustment index rate investopedia theresa chiechiunderstanding margin and marging tradingmargin refers to the amount of equity an investor has in their brokerage account to buy on margin means to use the money borrowed from a broker to purchase securities you must have a margin account to do so rather than a standard brokerage account a margin account is a brokerage account in which the broker lends the investor money to buy more securities than what they could otherwise buy with the balance in their account using margin to purchase securities is effectively like using the current cash or securities already in your account as collateral for a loan the collateralized loan comes with a periodic interest rate that must be paid the investor is using borrowed money and therefore both the losses and gains will be magnified as a result margin investing can be advantageous in cases where the investor anticipates earning a higher rate of return on the investment than what they are paying in interest on the loan for example if you have an initial margin requirement of 60 for your margin account and you want to purchase 10 000 worth of securities then your margin would be 6 000 and you could borrow the rest from the broker the securities and exchange commission has stated that margin accounts can be very risky and they are not appropriate for everyone 1