2006-10-26 09:30:12 · 5 answers · asked by amy c 1 in Business & Finance ➔ Investing
risk = big downside potential
reward = big upside potential
only trade on margin if u r very experienced and have great money management skills
2006-10-26 21:09:00 · answer #1 · answered by ask me how 2 · 1⤊ 0⤋
Part of the reason for the Crash of 1929 was the ability to buy or sell short with only 5% margin. The problem wasn't so much the short sellers, as the number of forced liquidations.
Trading today with 50% margin, or 2:1 leverage, is considered risky. You can make twice as much money with twice the number of shares, but you can also lose twice as fast.
Risk and reward are tied together. In order to get a higher reward, you must take a higher risk, and no other method than leverage exemplifies this rule so clearly.
Many people think futures or forex or commodities are risky, but it is the leverage that makes them risky, not the underlying asset or contract.
I trade the forex with 100:1 leverage. For just one penny movement in the British Pound against the US Dollar, I can make or lose $1,000 for every contract.
What is the risk of leverage? You can blow out your account in a few seconds, and maybe end up owing them your house.
2006-10-26 10:43:00 · answer #2 · answered by dredude52 6 · 0⤊ 1⤋
The risk is that you will get a margin call and you are unable to cover your position.
2006-10-26 09:37:14 · answer #3 · answered by Captin Trips 2 · 1⤊ 1⤋
Please tell me you have remotely studied economics, or the functions of the stock market. Please tell me you understand what 'margin' really means..... or should we all be catapulted back to October.... 1929.....
2006-10-26 09:38:23 · answer #4 · answered by jh 6 · 0⤊ 1⤋
stay away you will lose lose lose only your broker will make $$ please stay away
2006-10-28 11:17:59 · answer #5 · answered by vetech_61 2 · 0⤊ 1⤋