Example of buying on margin

Buying on margin involves borrowing funds from a broker to purchase more shares than you can afford with your own capital. For instance, if you have $5,000 and buy $10,000 worth of stock on margin, you may borrow $5,000 from your broker. This amplifies both potential gains and losses; if the stock price rises, your profits can significantly increase, but if it falls, you could face substantial losses and may be required to repay the borrowed amount.