A margin account is one that an investor holds with a broker, effectively allowing him to buy securities on credit. When the investor wishes to trade, he need only pay a certain percentage of the total value of the securities he is purchasing. The balance is borrowed from the broker, whose collateral is the value of the shares held in the account.
The minimum amount that must be held in the margin account is referred to as the margin requirement. This kind of arrangement works well for the investor when markets are rising as they are effectively leveraging their gains.
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