A margin account allows investors to borrow funds from a brokerage to increase their buying power, potentially magnifying both gains and losses. It provides flexibility for trading strategies like short selling, but comes with risks such as interest charges and margin calls. In contrast, a cash account requires the full payment of trades upfront, eliminating the risk of debt but limiting trading flexibility. Choosing between the two depends on an investor’s risk tolerance and financial goals.
Cash vs. Margin Accounts: What Every Trader Needs to Know
