Why would a margin account be advantageous?
Let’s compare a cash account to a margin account on a trade with a small profit. Assume that you invested $1,000 in a trade and the trade produced a 10% profit. The return on your investment would, of course, be 10%. But, if you invested $1,000 and borrowed $1,000 matching funds through your margin account, you’d have a $2,000 position. The same 10% profit on a $2,000 position equals $200. The return on your $1,000 investment is 20%. The ability to margin doubles your profit.
