What is margin trading and how do you trade on margin?

Last updated Wednesday 29 July 2026

What is margin trading?

Margin trading is another term for leveraged trading — the method used to open a position on a financial market using a deposit (called margin). When trading on margin, a trading broker is essentially loaning you the full value of the trade, requiring a deposit as security.

The margin deposit is the amount of money you need to place your trade, and is defined by the margin rate, which is expressed as a percentage.

For example, suppose you want to buy 10 shares valued at £100 each. If you were to buy these through a traditional broker, you'd need to pay the full £1,000 upfront. At a margin rate of 20%, you'd only need to put down £200 while still getting exposure to the full value of the trade.

It's important to remember that, because this initial deposit doesn't represent your full market exposure, you could lose more than this outlay if the market moves against you. Always take steps to manage your risk.

With us, you'll be trading on margin using financial instruments known as spread bets and CFDs. These enable you to speculate on the price movements of 15,000+ markets, including shares, forex, commodities, and indices and other markets.

There are two types of margin to consider. The initial margin is the minimum amount you'll need to put up to open a position — sometimes called the deposit margin, or just the deposit. The maintenance margin, also known as variation margin, is extra money that your online broker might request from you if your position moves against you. Its purpose is to ensure you've got enough money in your account to always fund the present value of the position, covering any running losses.

How does trading on margin work?

Margin trading works by giving you full exposure to a market, but at a fraction of the capital you'd normally need to outlay. Your margin deposit is a percentage of the full position size, and the margin rate is determined by your trading provider. Markets with higher volatility or larger positions may require a bigger deposit.

Trading on margin amplifies both profits and losses. Consider the effect of an upward £15 price change on a share worth £100. With traditional investing, this would mean you've earned a 15% profit.

By comparison, at a margin rate of 10% on the same share, you'd only outlay £10 to take a position. The £15 upward price movement would now result in a profit of 150% on your initial deposit. If the price movement turned against you by £10, you'd lose 100% of your initial deposit.

This magnification also works in reverse, which is why margin trading incurs increased risk over normal investing. If the share above dropped by £15 to £85, this 15% price depreciation would mean a loss of 150% on your deposit amount.

This means that while your losses are capped at your initial capital outlay with traditional investing, the same isn't true when trading on margin. With leveraged trading you could lose more than your deposit if you don't take steps to manage your risk. For more on protecting your positions, see our risk management guide.

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What's the difference between margin and leverage?

Margin and leverage are closely related. When you open a leveraged trade, you do so by putting down a margin deposit. This deposit gives you exposure to a larger position at a fraction of the initial capital outlay. The margin rate is expressed as a percentage, for example 10%. Leverage, on the other hand, is expressed as a ratio, such as 10:1.

For a position worth £1,000, depending on the market, your margin rate might be 10%. In this case, your deposit is £100. Because this deposit gives you exposure 10 times its size, the leverage ratio is 10:1. Similarly, for a margin rate of 5%, your leverage ratio is 20:1. To learn more about how leverage works, see our guide to leverage.

Benefits and risks of margin in trading

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 a deposit. Buying on margin also means you have the potential to spread your capital further, as you can diversify your positions over a wider array of markets.

However, although margin can magnify profits, it can also amplify losses if the market moves against you. This is because your loss is calculated from the full value of the position. There are steps that can be taken to mitigate the negative side of margin, such as implementing a risk management strategy using stops and limits.

If you'd like to buy and own shares instead of trading on margin, consider our share dealing offering.

What is a margin call?

A margin call is the alert we aim to send if the capital in your trading account has fallen below the minimum amount needed to keep a position open. A margin call can mean you'd need additional funds to balance the account, or to close positions to reduce the maintenance margin required.

You can correct this by either depositing enough funds to increase the equity in your account above the margin requirement, or reducing it by closing your positions. It's worth noting that in fast-moving or volatile markets, positions may be closed automatically to reduce the margin requirement on your account, which is why an active risk management strategy is so important.

How to trade on margin

1. Learn how margin trading works. You can access plenty of free resources on this website and on IG Academy to build a better understanding of how financial markets work and how trading on margin works, including familiarising yourself with the associated risks.

2. Decide how you want to trade on margin. When trading with us, you'll be using leveraged derivatives known as spread bets and CFDs to trade on margin. Through these instruments, you can track the price movement of the underlying markets.

3. Create an account. Open a live trading account with us. You'll be required to fill out a short form before we verify your identity. Once completed, you can deposit funds and start trading. If you're not ready to trade, you can open a demo account with £10,000 in virtual funds to practise in a risk-free environment.

4. Find your opportunity. Choose which of the 15,000+ markets you'd like to take a position on, including shares, forex, commodities and indices.

5. Place your first trade. Set your position size, remember to take the necessary steps to manage your risk, then place your deal and monitor its price movements.

FAQ

Ready to start trading on margin? Open a live account to trade spread bets and CFDs across 15,000+ markets, or practise on a demo account with £10,000 in virtual funds first. For more on managing leveraged positions, see our guides on leverage and risk management.