What are the risks of margin trading (investing with borrowed money)?

Margin trading uses leverage, such as borrowing money from a securities firm (a margin loan) to buy shares; gains grow when prices rise, but losses also grow when they fall.

If the share price falls and the account drops below the collateral maintenance ratio, the securities firm demands additional collateral, and if it is not provided by the deadline, the firm may sell the shares held at its own discretion (forced liquidation). If the proceeds are less than the amount borrowed, you could end up with a so-called 'empty account', losing your entire principal or more.