Chapter · Master Robinhood

Margin and the danger of leverage

Margin means borrowing money from the broker to buy more than your cash allows. This is leverage, and it cuts both ways. If the investment rises, your gains are magnified. If it falls, your losses are magnified too, and you still owe the loan plus interest. If your account value drops too far, the broker issues a margin call, demanding more cash or selling your positions automatically. Beginners are often better off avoiding margin entirely until they deeply understand the risk.

Start this lesson →

Free to play. No ads, no token, no account needed to start.

What you get asked

What does trading on margin mean?
Margin is borrowed money used to invest. It boosts your buying power, but the loan must be repaid with interest regardless of how the trade turns out.
Using borrowed money to magnify both gains and losses is called ___.
Leverage magnifies outcomes in both directions. It can turn a small move into a big gain or a big loss, which is why it demands caution.
What is a margin call?
A margin call happens when losses push your account below a required level. You must add cash or the broker can sell your holdings, sometimes at the worst moment.
Match each margin term to its meaning
These four terms travel together. Margin creates leverage, leverage raises risk, and a margin call is the painful reminder that the loan is real.
Why is margin especially risky for beginners?
With leverage a bad move can wipe out your cash and still leave you owing money. That is why many experienced investors treat margin with deep respect or avoid it.

The rest of this chapter

Learn how Robinhood works, how it makes money, and how to trade with discipline instead of hype.