Definition
Borrowing from your broker against the investments in your account, usually to buy more securities. The portfolio is the collateral: if its value falls too far relative to the loan, the broker issues a margin call demanding more cash, and can sell your holdings without asking in order to cover the loan.
Why it matters
Margin multiplies both directions: gains on money you did not have, and losses that can exceed your original stake. Margin calls cluster in crashes, forcing sales at the worst prices, which is how leverage turns a temporary drawdown into a permanent loss.
Example
An investor with $10,000 borrows $10,000 on margin and buys $20,000 of stock. A 40% market drop leaves the position worth $12,000, of which $10,000 is still owed: their equity fell 80%, and the broker's margin call forces selling near the bottom.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.