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Write an explanation of why margin trading either amplifies your gain or your loss.

  1. Write an explanation of why margin trading either amplifies your gain or your loss.
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Answer #1

Margin trading is the trading on the leverage .It is a type of trading in which funds are provided by third parties. It is a type of trading in which one can avail a large amount of leverage on a short capital.

Margin trading is a method of magnifying capital by obtaining leverage so it will magnify the losses as well the gains.

When you make a gain , you can make substantial amount of gain on a little capital, you'll just need to pay the small interest. Since the leverege provided is multifold, the gains are also multifold.

When you make a loss, it can be a substantial amount of your capital as the leverage magnifies the impact of losses and in addition one needs to also pay with the interest. So Since the leverege is multifold, the losses are magnified.

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