Margin trading is the practice of using borrowed funds from a broker to trade different financial assets. In other words, it is financial leverage that can potentially magnify gains but could also blow your trading account. These are some tips you need to follow when using margin trading:
Know the rules: there are a number of rules for each broker that could break a successful margin trading strategy. It is important that you have a detailed and comprehensive understanding of your broker's margin trading rules. Start small: start with low levels of leverage, once you build your confidence you will be able to use higher levels of leverage and increase your position size. Cut losses quickly: this is the #1 rule in trading, you must use stop losses in every single trade, not only for margin trading. Remember that when using margin sudden price shifts will be multiplied by the amount that you have borrowed. Monitor your positions: you must learn to closely monitor your margin trades and cut your losses before they can do serious harm to your account's value.
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