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Old 10-18-2012, 10:07 AM
 
2,185 posts, read 1,907,562 times
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Default Using Margin

I know that using margin is discouraged but are there any exceptions to that rule for you?

When you use margin, do you have a minimum and maximum that you will use? What about the time frame? The securities?
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Old 10-18-2012, 11:45 AM
 
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you should ask this question with the brokerage provider.
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Old 10-18-2012, 12:18 PM
 
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If you have to ask, don't use it.
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Old 10-18-2012, 03:01 PM
 
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Quote:
Originally Posted by Singlelady10 View Post
I know that using margin is discouraged but are there any exceptions to that rule for you?

When you use margin, do you have a minimum and maximum that you will use? What about the time frame? The securities?
I use it.
Ask any questions you have.
I'm with Charles Schwab and when I opened my account, a $5000 deposit allowed you to buy $10,000 in stock. Through something called SMA, I now have about a 3-1 ratio of buying power to cash available.
The interest rate is similar to a credit card. My credit card is 7.49%.
If I go into margin during the day and out by the close, no interest is accrued since the numbers are calculated overnight.
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Old 10-18-2012, 04:02 PM
 
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I use it.

You can use 4:1 leverage for day trading, and 2:1 for overnight trading. These are the industry standards, and most brokerages use abide by those rules.

If you have an account with 10K, you can do:

Day Trades
You can buy up to 40K worth of stocks for that day. You have to sell them by the closing bell.

Swing Trades
You can buy up to 20K worth of stocks for a longer trade. You can hold on to your stocks until you want to sell them.

Margin ratios are higher for other asset classes such as forex and futures.
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Old 10-19-2012, 08:16 AM
 
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Quote:
Originally Posted by Pivot Point View Post
Day Trades
You can buy up to 40K worth of stocks for that day. You have to sell them by the closing bell.
if your Day Trades goes south, then you have to come with 40K. Lot of money to play around. I used to do margin when I was single but now I have family. I can't afford to play like that.
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Old 10-19-2012, 08:40 AM
 
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Quote:
Originally Posted by samnyc View Post
if your Day Trades goes south, then you have to come with 40K. Lot of money to play around. I used to do margin when I was single but now I have family. I can't afford to play like that.
How did you do when you were on Margin? I am always curious if people actually lost money and had to come up with the difference.

It's almost like gambling, not investing.
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Old 10-19-2012, 09:22 AM
 
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I used to play with margine about 15 years back. I did very poorly. If you are thinking about doing that, first invest in some kind of investment training on your self. Learn all the basic.

Day trade is gambling. One thing is for sure. House always wins.
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Old 10-19-2012, 10:08 AM
 
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Quote:
Originally Posted by bbnetworking View Post
How did you do when you were on Margin? I am always curious if people actually lost money and had to come up with the difference.
That's what stops are for--to prevent big losses. If the trade goes against you, the stops keep your losses small. Before any trade, you have to decide how much you're comfortable with losing, and then put in stops for that amount. That way you never risk losing a lot.

Not using stops is the biggest mistake that people who don't know how to trade make.
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Old 10-19-2012, 01:57 PM
 
Location: Albuquerque
5,554 posts, read 8,808,289 times
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Quote:
Originally Posted by Singlelady10 View Post
When you use margin, do you have a minimum and maximum that you will use?
If you have never used it, then - just like learning about investing - start small.

Just using example numbers, but if you have $10k in securities and your
broker allows 50% ( $5k ), then try using $500 ( 10% of what you are allowed ).

( ... assuming you have almost no cash, so we can ignore it ... )
( ... also assuming that no change in the rest of the portfolio ... )

So for instance, if you have $10k of stocks and $2,500 of that is XYZ corp and
you think XYZ is going to make a move so you buy another $500 of that company.

Now, you have $10,500 invested and negative $500 in cash ( positive $500 broker loan ). You have $3,000 in XYZ corp.

Now, say XYZ moves down by about 17%.

You now have about $2,500 in XYZ and $10,000 invested and you are back to where you started. However, you still have a $500 broker loan.
If you can take that kind of pain, then go for it. If you are right, it can really pay off.

In the above example, a 17% rise means that you could sell off $500 of XYZ and still have $3,000 invested so you have a $500 profit,
but .... about $417 of that profit came from your original shares and the other $83 from the margin purchase.
Your gains were 20% better due to the margin loan.

It's just like learning to invest, you will never get a feel for it until you try it.
Just like learning to invest, if you start with money you can afford to lose, then you
won't kill yourself learning, but you will more fully understand how investing/margin works.

Margin is great for people who are right 55% of the time or more, but note that like when you take a 50% loss, you have to get a 100% gain
to make up for it. It's just that with margin, you can find yourself losing 50% with only a 10% decline if you have enough leverage.

Start small.
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