What Is Maintenance Margin?

Understanding maintenance margin is critical to many stock investors. Here are the basics of maintenance margin and how it is used in the stock market.

Maintenance Margin

Maintenance margin is something that will apply to stock traders that wish to trade on margin. The maintenance margin is the minimum amount of money that must be kept in an account for margin requirements. For example, when trading on the New York Stock Exchange and the NASDAQ, you must have at least 25 percent of the total value of the account available in margin. This prevents individual investors from over-leveraging their accounts.

While 25 percent is the bare minimum, the percentage that you will be required to hold in your account will vary depending on which broker you have. It is common for your broker to require 30 to 40 percent in margin in order to allow you to trade. Otherwise, they may start closing your open positions in order to get you back under the maintenance margin requirement.

Investment Impact

As a trader, you will always want to be aware of the maintenance margin requirement with your particular broker as well as the margin situation in your own account. If you start to go below your margin requirement, it could end up costing you a significant amount of money.

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