Extremely detailed explanation of margin trading【Secrets of Japanese stock trading】
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Title:Detailed explanation of margin trading【JapanStock Trading Secrets】
Issuer: Amigo Investment School
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On this pagewe explain margin trading in great detail
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Reasons why margin trading tends to lead to exit
First, since margin trading involves borrowing money to invest, the risk increases. Due to price fluctuations or unpredictable events, many investors incur losses and are likely to exit.
Furthermore, since debt must be repaid, if prices do not move in the expected direction, losses can swell, causing many investors to be unable to endure the pressure and exit.
Emotional decisions and panic selling are also factors. Margin trading requires mental strength and calm judgment, but many people cannot withstand it.
Additionally, margin trading is sensitive to information and market trends; without accurate information, large losses can occur.
Inaccurate information and market manipulation are also problems.
Margin trading often involves taking large risks in a single trade; if successful, large profits are possible, but a failure can be fatal.
As a result, many investors take on excessive risk and end up exiting.
About the cost of borrowings (reverse borrowing)
In margin trading, reverse borrowing (gya-ku hire bu, or reverse borrowings interest) is an important element.
This refers to the interest paid on borrowed assets when selling stocks or securities for a set period.
Usually, this interest is determined based on market supply and demand.
When there are few lendable securities or demand increases, the reverse borrowing rate rises, placing a burden on the seller.
Reverse borrowing becomes a cost for sellers (short sellers) and affects them when held for a certain period.
This is considered as part of risk management, and when reverse borrowing is high, traders often reconsider.
Also, a high reverse borrowing rate can indicate temporary market overheating or supply-demand distortions.
What are the advantages of margin trading?
There are several advantages to margin trading.
First, capital efficiency improves.
You can trade large assets without significant personal capital, making it easier to diversify risk.
Also, leverage can be used to take large positions with a small margin, increasing profit opportunities.
Margin trading is suitable for short-term trading and can respond quickly to market moves.
Furthermore, it helps with hedging and portfolio diversification, making it suitable for risk management.
On the other hand, risks are higher, so careful trading strategies and risk management are essential.
The required investment history to use margin trading may vary by country and brokerage.
Generally, in many cases, having a certain trading track record or assets is a requirement.
Specific requirements differ by region and brokerage, so for detailed information, contact the relevant brokerage or regional regulatory authority, or check the relevant information on their website.
Also, since margin trading is high risk, it is important to consider carefully.
