Pros and cons of margin
Pros of margin
Margin can magnify your profits, as any gains on your position are calculated from the full exposure of the trade, not just the margin you put up as deposit. Buying on margin means that you have the potential to spread your capital even further, as you can diversify over a wider array of positions.
Unlike unleveraged products, trading on margin enables you to go short on markets – so you can profit from markets that are falling in price, as well as rising.
Cons of margin
Although margin can magnify profits, it can also magnify losses if the market moves against you. This is because your loss is calculated from the full value of the position, not just the margin. However, there are steps that can be taken to mitigate the negative side of margin, such as implementing a risk management strategy.