How to trade using margin properly?

T

trendisyourfriend

Hi guys, I've been paper trading stocks for a while now and I'm curious to find out how to use stock margin properly.

Let's say I have a $10,000 account. I would like to trade VRTS, which is at 313.09. I want to risk 1% of my account per trade and use 50% stock margin.

I use an online stock position calculator to find the following information:

Total investible assets: $10,000
Entry price: 313.09
Stop price (7%): 291.17
Number of shares to buy: 4
Position Value: $1,252.36
Equity at Risk: $100.00

If I decide to buy stocks on margin and want to keep my account risk at 1%, do I simply buy 2 shares using cash and 2 shares using margin? Or do I buy 4 shares with cash and 4 shares using margin for an account risk of 2%?

Thanks
 
Last edited:
To me, if VRTS goes from 313 to anywhere near 291, the trade went the wrong way and you should of sold much earlier.
 
Tarzan said:
To me, if VRTS goes from 313 to anywhere near 291, the trade went the wrong way and you should of sold much earlier.
More...
This is whats wrong with the internet...no one asked what you thought about the trade. He is asking about margin.
 
trendisyourfriend said:
Hi guys, I've been paper trading stocks for a while now and I'm curious to find out how to use stock margin properly.

Let's say I have a $10,000 account. I would like to trade VRTS, which is at 313.09. I want to risk 1% of my account per trade and use 50% stock margin.

I use an online stock position calculator to find the following information:

Total investible assets: $10,000
Entry price: 313.09
Stop price (7%): 291.17
Number of shares to buy: 4
Position Value: $1,252.36
Equity at Risk: $100.00

If I decide to buy stocks on margin and want to keep my account risk at 1%, do I simply buy 2 shares using cash and 2 shares using margin? Or do I buy 4 shares with cash and 4 shares using margin for an account risk of 2%?

Thanks
More...


I don't think you should worry about this. You are acting like a hedge fund. You are not, you are a home gamer. You shouldn't have the same risk controls because you won't gain materially using the same rules. Use maximum margin. Put 10K in one stock and use margin to buy another 10K of a different stock. If you're not comfortable with that, I would advise not having more than 4 or 5 positions amongst the 20K in overnight buying power. Focus on positive expectancy. Use margin to get more from those trades. You won't make anything risking $100. You are not a large hedge fund, use your advantage of speed and concentration.
 
newwurldmn said:
Margin is determined on an aggregate basis. You first use all your equity then you start using your margin.
More...

to expound a little bit. Buying power is different from margin in that buying power is your equity plus your margin capacity. Buying power is a proxy for amount of risk you can take.

In a long only book: margin will mean you are borrowing money from the broker (and paying margin interest rate). That only happens after you have invested all your equity.

in a PM account with options this isn’t the case.
 
You must log in or register to reply here.
Back
Top