Margin trading is the process of trading a financial asset using borrowed funds from a broker or exchange in a leveraged position. This leverage can range anywhere from 2 to 150 times your collateral. The greater the leverage used, the greater the risk of margin trading liquidation. If a trade goes against a trader (i.e., in the wrong direction), the trader’s collateral is liquidated, resulting in the permanent loss of the entire initial position. Because of the higher risk profile and potential for large financial losses, margin trading is not recommended for inexperienced traders.
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