Trading 101: What is a Margin Account?

[@lucasvasquez3764]

Love how he treats his audience like we are intellectually challenged, and he's absolutely right!

[@claytrader]

I treat my audience like I treat myself lol

[@VeryUnepikGuy]

This comment makes my day!!! So true in my case...

[@wiredawg2005]

I'm also good with that...when I'm lost on any subject, I like to say; "explain it like I'm a 5 year old." I use that to test folks that like to use big words when attempting to teach, explain or just conversate. If they can do that then, I'm more inclined to listen...

[@wyattevans4791]

😂

[@tahachouache9349]

😂😂😂😂

[@Gregory-ud6zq]

I’m not even joking I watched over 5 videos and was more confused then when I started and then watched this video and everything is so clear now your a life saver

[@claytrader]

Thanks for the feedback. Glad it could help.

[@Gregory-ud6zq]

Responds to comments 2 years later what a god

[@claytrader]

haha, I assure you, I'm quite human lol

[@Greenmick6982]

Same. Almost ready to jump in. This is a great start.

[@sarakeem.213]

My dad is a teacher and that makes me respect teachers a lot for the great work they do.and you remind me of him you are a great teacher and plse I pray you enjoy doing it buddy. You are one of the best teachers out here on KZbin first time I’ve seen your material and I’m really impressed with your methods. Thanks for the sacrifice you making. Always remember you are helping a lot of people who needs your help.

[@claytrader]

Thank you for the kind words.

[@HyenaHouseENT]

Finall after sorting thru channels... I finally found a good teacher on youtube! Subbed :-D do keep up the great work & thanks for your clear breakdown of of info

[@claytrader]

Thanks for the kind words. Glad you enjoy!

[@ferdinanddandrade]

agreed

[@jahanarahelen4233]

Wonderful job. I feel like I am taking a real class! That's what I am looking for. Thanks Clay.

[@claytrader]

Thank you. Glad you're finding it helpful.

[@sastindxa7]

Holy smokes..! Youbarevthe best person with teaching abilities on youtube in my opinion. Thanks alot 👌👌

[@claytrader]

Cheers

[@ElementofWorship]

I watched a different youtuber explain stocks with a notepad in front of me, and every time I was confused or needed to look something up, I wrote it down. Filled up a whole page and felt overwhelmed. I watched 6 of your videos with my pen and paper, and didn't write down any questions. I understand! This is so great, thank you very much. :)

[@claytrader]

Thanks for watching!

[@G2020-]

Great video and a big warning to new investors to stay clear of margin accounts.

[@claytrader]

Absolutely!

[@yasmeenahmed7989]

I hate loans. I would stick to cash account as a beginner. Thanks for enlightening me, Clay!

[@claytrader]

You're welcome.

[@vamaidsociety1766]

Ya kinda like a debit card. Use your margin as a cash account

[@ryannewton5423]

So I got a margain account but I Applyed As a cash One is that Good? I also got my tsfa as well. Reason why I got the margain account was to buy OTC.

[@MultiChrisjb]

how do you short a stock with a cash account?

[@sdgirlCook]

​@@MultiChrisjb you cant

[@WalterGerson]

Love the self-correction analogies as you teach the content. Very genuine and extremely helpful videos.

[@claytrader]

Glad you enjoyed.

[@nicoleluo6692]

Thank you 👍 That’s also my principle, always respect the market and respect every penny of your money

[@claytrader]

Cheers

[@garyzimmerman90]

Excellent explanation of margins. No beating around just straight out forward.

[@claytrader]

Thanks for the feedback

[@sticksnstones23]

I use E*TRADE. I only want to use my own money but I can’t wait for money to clear from multiple trades daily. Is a margin account the answer ? Or will I be paying fees to E*TRADE to cover me until my money clears ?

[@claytrader]

Only pay margin if you are holding overnight.

[@abduljlilalzoheri]

good tool but there is risk of losing money and have debt you are an honest man and i respect that using trading simulator batter at the beging

[@claytrader]

yes, you need to be careful for sure

[@Meganwithoutaplan]

You explain things in your videos as if your viewer was a 6 year old.... THANK YOU! I need things explained that way. You are the BEST Stock teacher, i'm SO HAPPY I found your page.

[@claytrader]

I'm about as smart as a 6 year old, so yeah, that's how I need to explain it so I understand lol

[@Meganwithoutaplan]

@@claytrader haha, Well same... and thank you for that!

[@mferreira1231]

Very, very well explained concepts! Crystal clear Clay! Thanks for sharing! cheers

[@claytrader]

Thanks for watching!

[@ArmageddonAfterparty]

Not for me that. I'd rather go slow and lose only money that I own.

[@claytrader]

I'd say that is very wise.

[@darienturner123]

You don’t own money. Subconscious the reason you trade

[@larrysheran]

@@claytrader Hey Clay big fan here. Had a question. So I inputted my information in TD Ameritade such as employment, Net Worth, etc.. and it converted my cash account to margin account. How can I revert back to a Cash account from a margin account with TD Ameritrade? Same as George I rather start slow with my own cash.

[@claytrader]

@@larrysheran I'd give TD Ameritrade a call.

[@ManifestFunds]

instuctions not clear, i got MARGIN CALLED

[@04soccerfreak]

Please don't use the green marker. It is very hard to see on the whiteboard

[@claytrader]

You're absolutely right. Yikes!

[@Poker-is8dt]

Hey clay, nice video! I recently got a margin account with Scottrade 2:1. They said the interest is 7%, is that about the standard rate? Also I believe the guy I talked to on the phone said that as long as the position is opened and closed in the same day there is no interest on that money borrowed. Does that sound right? Thanks, I will be looking into your website

[@dandagerman6604]

y0u better let that green marker scare you into respect!

[@claytrader]

The margin rates are for overnight holds, so yes, that is accurate. 7% sounds pretty standard.

[@soo-miyun6353]

haha

[@jcortega87]

Definitely cleared that up for me, thanks for the warning too!

[@claytrader]

You're welcome.

[@TrungNguyen-ho1xn]

When do you have to pay off the margin debts?

[@claytrader]

Depends on the situation.

[@bazerra854]

Great video Clay 👍🏻👍🏻 I been learning a lot from you just by watching your KZbin Videos. Proud Clay subscriber here 👆🏻

[@claytrader]

Awesome, thank you!

[@fordexplorer5456]

Clay you are the best when it comes to explaning compare to other (youtubers). keep up the good work! thank you so much

[@claytrader]

Thanks, will do!

[@salehnasser1280]

11 golden minutes in my trading journey. Thank you for making this video! And noted, I will impress the ladies by using this fancy lingo :-D

[@claytrader]

Cheers

[@malr1975]

Hey Clay, good video...subbed. Got some questions for you, or perhaps you could do a video. 1. When you have a margin account, when are you actually using margin? For example, say a trader has $100k in a margin account that is their cash. Are you trading on margin when you have exhausted your $100k capital on stock, or is each trade on margin? EG I buy $100k of Microsoft. I have no cash to buy more, so additional buys are on margin? Or would the first $100k trade in Microsoft be on margin? I find this confusing as some people say you don't need to use your margin and it can be there when you need it, but I don't see any clear explanation on how to put this into practise. 2. Related to 1 above, when you set a prudent Margin Cushion, what percentage would you suggest and is it based on capital? EG I have $100k of 'my' cash in Margin act, and I set my Margin Cushion at 25%. Does that mean I never borrow more than $25k (so $125k total), or does it mean I never borrow more than $75k (so $175k total) and $25k is the emergency reserve cushion? 3. On Interactive Brokers, you can transfer stock positions between Cash and Margin account. If I do this from Cash acct to Margin acct, is transferred stock subject to margin rules if it was bought with cash on the cash account? Thanks for driving it home that margin is serious business...I find the broker information is not clear and so your videos are very appreciated.

[@claytrader]

Good questions... I'll try and see if I can get a video out.

[@malr1975]

@@claytrader Excellent! Looking forward to it.

[@TheJaWoman]

wow very good explanation! I finally understand...thanks

[@claytrader]

Glad it could help!

[@xilllllix]

very helpful for newbies, thanks!

[@claytrader]

Glad it was helpful!

[@jeffytube]

So in a margin account, say you put $5,000 in. But you only invest the $5,000 not the $5000 borrowed, would you be charged marginal interest ?

[@claytrader]

No.

[@garyhite393]

Great info clay! like your style, no B.S. just the beginning for me and I really like all of the clarification that you provide within terminology. you are really helping my understanding of multiple scenario and I am a big fan.

[@claytrader]

Thank you for the feedback. Glad you enjoy my style. When you are ready for all the knitty-gritty details of trading, head here claytrader.com/courses/

[@NYCE_Fishing]

Great video Clay. I'm brand new to all of this. I have watched all of your Trade 101 videos. I want to learn and start the right way.

[@claytrader]

First step is surrounding yourself with veteran traders, which you can do here claytrader.com/innercircle/

[@MTLJack]

wow, best video i have watched in a while. Thank you

[@claytrader]

Glad you enjoyed it!

[@JollyCerealBowl]

This was awesome teaching; thank you Clay.

[@claytrader]

And thank you for watching.

[@VaraMARVELleader]

Hai Sir I am from India. i am blessed to watch Your Classes and easy to understandable

[@claytrader]

Thank you for the feedback. Glad they are helpful!

[@ajyb5289]

Very helpful. I was stuck with a book reading over and over 😅

[@claytrader]

Happy to help!

[@ricardoramos1491]

timeless video thanks for the good explanation..

[@claytrader]

Glad it was helpful!

[@MrBerry-nb1ez]

"Im a Trader now" LOL LOL Love your work man Thanks for all the vids!

[@claytrader]

Cheers

[@RickyStufff]

please do a video on how funds are settled in a margin account, do you have to wait 3 days like a cash account to trade it again? how it affects the day trader making multiple trades per day. thanks in advance i really like your vids

[@claytrader]

Thanks for the idea. I'll see what I can do.

[@Tennis-3582]

Why haven't I subscribed yet!! After all the information I'm getting from you I should definitely subscribe.

[@claytrader]

I agree!

[@jeszone]

Hi! Wonderful teaching! Can you do a specific video on how traders technically loose money?

[@claytrader]

Here ya go: claytrader.com/videos/how-a-stock-can-lose-you-money/

[@KASUN_M]

Watched a bunch of your videos today. Thanks they are very helpful for me as a beginner.

[@claytrader]

Thank you for watching!

[@m2kuk]

great video! I'd like to ask couple of questions Let's say same example as yours. 1) if I buy 5000$ worth of stocks, is there any interest? 2)If I buy 10000$ worth of stocks, do I have to transfer money to broker account to pay interest? do the brokers charge interest usually daily/monthly basis?

[@claytrader]

You just need to read the "margin requirements/policies" that every broker outlines. Each can vary in ways, so it's best to just look at them case-by-case.

[@the_kotes]

Finally i get it. Thanks men!!!

[@claytrader]

You're welcome. Glad it could help.

[@cfrtravel7734]

Thank You!! Always wondered what that "margin" thing was on my Schwab account - Nice to know I have that "leverage" :-)

[@claytrader]

Happy to help!

[@flashyflash1164]

Great explanation . Looking to upgrade my account still on the fence though

[@claytrader]

Glad I could help

[@catherinegontran]

Wow this was very well explained!!! Thank you for making this easy to understand! I also enjoyed your gasoline metaphor. Made sense to me lol

[@claytrader]

Glad it could help!

[@fararrarara6769]

You should explain more on the benefit using margin acc, i.e capability to short stock and longer settle time.

[@claytrader]

I have that in other videos.

[@mrfordsclass]

That was an outstanding explanation.

[@claytrader]

Thanks

[@XxXK9]

I have a margin account and use it as if it’s a cash account. It is nice to see my margin be in the 10s of thousands of dollars. But like the guy said…. RESPECT IT 😎

[@claytrader]

Cheers to that!

[@brettlund1080]

Excellent video. Your descriptions are clear and concise!

[@claytrader]

Glad you enjoyed and found it helpful.

[@ichoudhury007]

It’s very easy to get carried away fast. I didn’t feel the pain with me charging credit card back in the days and got caught with my pants down when slammed with a huge statement!! I learned my lesson and moved to Debit card. But once again, found myself in a very similar situation with margin account! Yikes!! Be careful out there 🥺🥺

[@claytrader]

Well said.

[@Xrnmoto33]

Great Explanation!

[@claytrader]

Thanks!

[@danielsugano5801]

Clear and honest presentation. Thanks.

[@claytrader]

Thanks for watching.

[@briandonnelly9862]

Simply explained. Well done bruv.

[@claytrader]

Thanks for watching.

[@umeshjoshi57]

You are a good teacher.

[@claytrader]

Thanks!

[@AB-C2]

Wel explained, especially the interest part ..... Thanks again.

[@claytrader]

Glad you liked it!

[@stevencuevas6939]

Finally found a good teacher

[@claytrader]

Thanks! Glad you enjoy.

[@ssoltani22]

Love the way you explain!

[@claytrader]

Thanks for the feedback Saman.

[@Funboyy123]

The fire analogy was hilarious, the seed one was great tho xD

[@claytrader]

Thanks

[@Eddy.user-pq5fg2bf7s]

Your the best teacher

[@claytrader]

Happy to help!

[@BenTrades]

Another plus of a margin account is instant settlement of ur funds and u dont get charged interest on that if ur using ur own cash that u put in

[@claytrader]

True

[@supperawesomemomboss4477]

“Nope - don’t wanna use pink” 😂💕 Love these videos ! It makes sense!!!

[@claytrader]

Cheers!

[@christophermcdaniel9708]

Great explanation, simplified

[@claytrader]

Happy to help!

[@MrJerseysAddiction]

Great work here!

[@claytrader]

Thanks.

[@HugeDaKing]

I'm trying to learn as much as I can before i start trading and your videos are helping me so much. And it would be much helpful if you inclide some examples and more numbers in explainin. like, for example in this video, examples of how much is the average of margin interests out there. I hope i make sense. english is not my 1st language. Thanks for the videos.

[@claytrader]

I offer training courses here claytrader.com/courses/

[@razvansas4443]

so can you open a margin account and use it as a cash account just to be able to also short sell?

[@claytrader]

Correct.

[@razvansas4443]

oh wow, that was fast ..thank you

[@claytrader]

You're welcome.

[@ryannewton5423]

@@claytrader beauty!

[@claytrader]

@@ryannewton5423 cheers

[@BishopCityPresents]

Great video cleared alot up for me

[@claytrader]

Happy to hear it could help.

[@Venture_Warrior]

Time to go balls deep on margin! The stock market looks ready to bounce this summer.

[@claytrader]

I remember you! The degenerate gambler!

[@Venture_Warrior]

@@claytrader i was... I hope I am not anymore . Your memory is godly... whoa. I even have a slightly different name... my fat black face must be a big giveaway.

[@claytrader]

@@Venture_Warrior glad you've changed your ways!

[@Venture_Warrior]

@@claytrader that sir is some text book 📖 sarcasm

[@claytrader]

@@Venture_Warrior not true... if you have changed your ways, that's great!

[@callidusvulpes5556]

I'm sure you get this a lot, but how much time do you spend responding to comments? I've never seen this level of dedication to responding to comments. Hopefully more people take a hint from you. Oh, and good video I "knew" (assumed correctly) most of this stuff already, but it's good to get reassured and I learned a few new things like what "leverage" is.

[@claytrader]

It's just part of my morning routine. Been doing it for years, so I've grown use to it :-)

[@malekai777]

this exactly what i was looking for

[@claytrader]

Great!

[@MrChad-rs4ki]

There are tons of KZbin videos out there about "what a Margin account is". I was looking for someone to please explain "How to use" or "execute" a Margin trade.. Margin maintenance requirements, minimum balance requirements to use Margin for both Non-Day trading and Day Trading etc.. Can you please make a video detailing how to "execute a margin trade"? What is the maintenance requirement and how does it work? Also, can investors choose the amount or percentage of margin they want to use? Or does it always have to be a 2:1 ratio? Can I invest $10,000 of my own and only use $2,000 margin instead of $5,000???... Please make a video discussing these things. Thank you so much.

[@claytrader]

I'll see what I can do.

[@MrChad-rs4ki]

Hi Clay. If you can make that video about executing a margin trade that would be great! Thank you so much.. Can you also make a video explaining Short Sell and Buy to Cover?.. If price rises past what you Sold it Short for by 5 or 10 cents before it drops back down again, is that acceptable or is the investor in trouble even for a 5 or 10 cent fluctuation? How much price fluctuation is allowed using the Short Sell & Buy to Cover strategy?

[@claytrader]

@@MrChad-rs4ki good ideas... I'll see what I can do.

[@IAM-fz8cw]

I really believe I will be good at this if I stick with it and the videos are definitely helpful. Today is the day i decided to really dive in and start learning to prepare myself for when I choose to invest. I invite all insight that is offered.

[@claytrader]

Be careful.. this stuff is addicting ;-)

[@pauldilley8974]

So, if I get it, in laymans terms: You put X amount into this "margin" account, the broker loans you a multiple (the "leverage") of that (the total being called "buying power"). There's an interest rate on the loan ("margin rate"). Ideally you'd be able to make enough gains to make a profit and offset the interest rates. However if you make a loss greater than your original amount, you can end up owing money (as the loan eventually has to be repaid to the original amount?).

[@claytrader]

Right

[@vedaste19]

Hey Clay, thank you for your videos, I am learning so much. I have bunch of questions tho... but let me ask you one for now. How do you go about trading on USA stock market when you live, let’s say Africa ?

[@claytrader]

You would need a broker that gives you access to USA markets. Interactive Brokers is the company I'd start with.

[@br3ntst3wart]

Do you have to wait for cash to settle for 2 days to use again with a margin account like a cash account?

[@claytrader]

No. No cash settlement with margin.

[@matthewbrady9342]

You turned around to write on the board, I saw the back of your shirt and immediately started laughing to myself. Thank you.

[@claytrader]

:-) Good!

[@Michael-qy1jz]

Do you have a video showing how you physically short a stock online in your account after you open a margin account??

[@claytrader]

Yes, in many of these live trade videos, I short stock claytrader.com/blogs/live-trade/

[@garybaxter3871]

You need a margin account to trade credit spreads and other option strategies, but you do have to use it, or borrow from it.

[@claytrader]

Nope!

[@bufferzone7088]

Thanks Clay!

[@claytrader]

You're welcome!

[@zarasjourney6627]

Thanks so much once again beautifully explained♡♡♡

[@claytrader]

Thanks for watching!

[@precious_orim]

I love your channel ♥️♥️

[@claytrader]

Thanks!

[@mytravelvlog4593]

Nice topic I have a question: I trade in webull and what is initial requirements and maintenance requirements under margin requirements

[@claytrader]

That would be a question for their customer service.

[@tiarayong5377]

Thanks for a great video, nice and clear😁

[@claytrader]

Glad it was helpful!

[@leachristinstout1196]

thanks so much , you explain so clear , good job !!!

[@claytrader]

Thanks. Glad it could help.

[@johnpenaflor2662]

My Financial advisor told me,” when you buy CFDs you dont own shares, you have contract with the Broker theoretically if the broker goes bankrupt you have no ownership with the shares that is one risk you have to understand that’s why we never hold CFDs for long, like in and out we trade and we get out”. what are your thoughts for that? is it true?

[@claytrader]

CFDs are definitely risky for these reasons.

[@michaellin3528]

Hey Clay, if I have a margin account and I buy shares so that my cash balance can cover it, will my broker still loan me a percentage of the transaction automatically? I just want to make sure that I don't risk getting a margin call if I trade just with the cash that I have. Thank you for your time and keep it up Clay!

[@claytrader]

No, you'd just be using cash.

[@halo4logan]

Please do a video on how to sell stocks so that you know you are making money after what you paid for them.

[@claytrader]

Here you go Angie claytrader.com/videos/how-to-sell-a-stock/

[@kidk0be]

Great explanation. Thank you

[@claytrader]

Glad it was helpful!

[@edvardschock9739]

great info. Thanks

[@claytrader]

You're welcome Edvard. Thanks for feedback.

[@phoneixashes]

Can you please tell me the associated formulas with margin accounts, and margin transactions/purchase, such as rate of return? Thank you,

[@claytrader]

Maybe I can do a video someday. Thanks for suggestion.

[@rmasombo]

The money in margin account is separate from the cash account, isn't it? . And to get a loan from the broker I've got to have some money in my margin account or no loan, right?

[@claytrader]

Correct

[@jermaineh6298]

Depending on the stock, some brokers do not loan money for penny stocks

[@claytrader]

That is true.

[@jermaineh6298]

good vid btw, your explanation was very transparent @@claytrader

[@claytrader]

Thanks.

[@woofwoofdoggo]

Thank you for the video!

[@claytrader]

You're welcome.

[@naravjitdhimann1730]

great vedio, thanks for that

[@claytrader]

You're welcome

[@tsupeteromrb1641]

thanks man....nice lecture

[@claytrader]

Glad you liked it

[@luc5929]

Great lecture on margin account. Question : If I have $5000 in my margin account and trade a max of $5000 for shorting would there be any interest?

[@claytrader]

Yes

[@Ajwhite1]

Smart ! Thanks for keeping it 💯

[@claytrader]

You're welcome.

[@SeanMatthewWhitfield]

Thanks for the information.

[@claytrader]

Any time!

[@karthickraja2051]

Hi clay, what are options and futures trading. Any videos containing a simple explanation of the concepts, like above??

[@claytrader]

Yup, here claytrader.com/takecontrol/

[@daifuruta581]

thank you for lesson.

[@claytrader]

Thanks for watching

[@titonothere6179]

Great video. I’m a new retail investors trader. I have a question: why would I ask my broker for a loan? In what situations will I need to do that? I understand it’s buying power, but it comes w/ a tons of risky. Why this and not cash account? Thank you for your time.

[@claytrader]

You answered your own question: buying power. The same reason you would go to a bank for a house/car loan.

[@titonothere6179]

@@claytrader I understand that but why would I need buying power? I just wanna buy what I have in cash. I don’t wanna be tied to a loan Atleast not right now. So should I just go the cash account route if I don’t have any use for a loan at this moment?

[@claytrader]

@@titonothere6179 because you want to BUY MORE of a stock.

[@titonothere6179]

@@claytrader True but if I lose it all I gotta still pay them back + interest? I understand not all debt is bad debt. However I’m so new I feel like getting a loan rn is to advance for me. I wanna get my feet wet rn and buy w/ the cash what I can afford to lose. Getting a loan for buying stocks doesn’t sound to promising at this moment I’m only 19. I will look into it. Thank you!

[@claytrader]

@@titonothere6179 if you are just starting, then yes... stick with cash only

[@jordanyperalta6748]

1-1 leverage would be 10k with 5k deposit. 2-1 would end up being 15k in B.P

[@claytrader]

Right