Margin Accounts:How they Work?

When you open your (non-IRA) account, your broker will ask if you want to designate it a standard "Margin Account." The standard margin is called a "50 percent margin account." That means whatever amount in dollars you deposit into the account, your broker will match your deposit with a loan of equal value. So, if you open an account with $15,000, your broker will automatically loan you another $15,000. Suddenly, you have $30,000 at your fingertips.

However, like any bank, your broker charges interest on the loan. The rate is usually low, however, and no interest is charged unless you actually use the money. If you plan to make more than four round trips (open and close a position) during the space of five trading days, the SEC deems you a "pattern day trader." You'll need to open your equities trading account with a minimum of $25,000. And you must maintain that balance, or higher, throughout every trading day, no matter what.