Two Reason Why Open Margin Account

There are two reasons to open a margin account. First, as you become more experienced, the margin gives you extra buying power. Thus, you're "leveraging" your money, or making more money (we hope) than the interest on the loan costs you. Second, the only way you can sell stocks short is to open a margin account. In a volatile market, selling short can reap big profits.

If you're an old pro in the stock market, you may already have a margin account. If you're new to this game, your best strategy is to open a margin account, then immediately forget you have the extra buying power. One of the riskiest things you can do as new trader is max out your entire account, margin and all. Please understand - when a stock you are holding on margin falls, you lose twice as much money (your equity+margin equity) as you would if you were playing with just your own cash.