margin account: meaning, definition, pronunciation and examples
Low in everyday contexts, High in financial/business contexts.Formal / Technical
Quick answer
What does “margin account” mean?
A brokerage account that allows an investor to borrow money from the broker to purchase securities, using the securities in the account as collateral.
Audio
Pronunciation
Definition
Meaning and Definition
A brokerage account that allows an investor to borrow money from the broker to purchase securities, using the securities in the account as collateral.
A type of financial arrangement enabling leveraged trading, often associated with higher risk and potential for amplified gains or losses. In broader terms, can metaphorically refer to any situation involving borrowed resources or operating with minimal safety.
Dialectal Variation
British vs American Usage
Differences
No significant difference in meaning or usage. Regulatory frameworks (e.g., FCA in the UK, SEC/FINRA in the US) differ, but the term is identical.
Connotations
Carries the same connotations of risk, leverage, and sophistication in both varieties.
Frequency
Equally common in the financial sectors of both the UK and the US.
Grammar
How to Use “margin account” in a Sentence
SUBJ + open + a margin account + with + BROKERSUBJ + use + a margin account + to-INF (e.g., to buy stock)BROKER + issue + a margin call + on + accountVocabulary
Collocations
Usage
Meaning in Context
Business
Essential term in stock trading, investment banking, and personal finance for sophisticated investors.
Academic
Used in economics, finance, and business studies papers discussing market leverage, risk, and investor behavior.
Everyday
Rarely used; if mentioned, it's in the context of personal investing news or discussions about market downturns (e.g., 'margin calls forced selling').
Technical
Precise term in brokerage agreements, financial regulations, and trading platform interfaces.
Vocabulary
Synonyms of “margin account”
Neutral
Weak
Vocabulary
Antonyms of “margin account”
Watch out
Common Mistakes When Using “margin account”
- Using 'margin account' to refer to a standard bank savings or checking account.
- Incorrect pluralisation: *'margins accounts' instead of 'margin accounts'.
- Confusing 'margin account' with 'profit margin' in a business context.
- Using the verb 'to margin' incorrectly; it's more common to say 'to trade on margin' or 'to use a margin account'.
FAQ
Frequently Asked Questions
If the value of the securities in your account falls below a certain level (the maintenance margin), your broker will issue a 'margin call', requiring you to deposit more money or sell assets to restore the required equity.
Generally, no. Due to the complexity and risk of amplified losses (including losses exceeding the initial deposit), margin accounts are recommended only for experienced investors who understand leverage and can monitor positions closely.
Yes, you can often withdraw cash up to the amount of your available 'buying power' or equity, but this will increase the borrowed amount (debit balance) and associated interest charges and risks.
In a cash account, you can only trade with the settled funds you have deposited. In a margin account, you can borrow funds from the broker to trade, allowing for larger positions (leverage), but you must pay interest on the borrowed money.
A brokerage account that allows an investor to borrow money from the broker to purchase securities, using the securities in the account as collateral.
Margin account is usually formal / technical in register.
Margin account: in British English it is pronounced /ˈmɑːdʒɪn əˈkaʊnt/, and in American English it is pronounced /ˈmɑːrdʒɪn əˈkaʊnt/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “To buy on margin”
- “To be on margin”
- “A margin call (related but not an idiom)”
Learning
Memory Aids
Mnemonic
Imagine a page where you write your investments. The 'margin' is the borrowed money you write in the empty space at the edge of the page. Your 'account' is that page, so a MARGIN ACCOUNT is your investment page that includes that borrowed edge-space.
Conceptual Metaphor
INVESTING IS A LEVERAGED JOURNEY / FINANCE IS A PHYSICAL STRUCTURE WITH SUPPORTS (the margin is the borrowed support allowing a larger structure).
Practice
Quiz
What is the primary function of a margin account?