What is buying stocks on credit with a loan?

Buying stocks on credit with a loan, often referred to as purchasing on margin, involves borrowing money from a brokerage firm to buy more shares than you could with just your own funds. This strategy amplifies both potential gains and losses, as any profit or loss is calculated on the total investment, not just the amount of your own capital. While it can increase returns during a market upswing, it poses significant risks, especially if the stock price drops, potentially leading to margin calls where the investor must deposit more funds or liquidate positions to cover the loan.