Stock Trading Lesson | Leverage

Today's stock trading lesson focuses on the use of leverage. Trading using leverage is trading on credit by depositing a small amount of cash and then borrowing a more substantial amount of cash.
Trading stock using margin starts with opening a margin account with your brokerage firm. This type of account differs from a regular cash account that you open with a financial institution. You must pay a deposit that acts as your margin, or initial equity in the account.
Leverage warnings are provided by financial agencies, such as the U.S. Securities and Exchange Commission (SEC), and brokerages that offer to trade using leverage.
These warnings remind you that trading using leverage carries a high degree of risk to your capital; it is possible to lose more than your initial investment, and you should only speculate with money you can afford to lose.
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