Margin for the active trader

How can traders and investors use margin?

There are a variety of ways traders can apply margin, depending on the type of investor or trader they are. Here are some ways a margin-approved investor or trader might consider using margin.

Margin for the active trader

For traders and investors who buy and sell frequently, margin can potentially be a handy ally when near-term potential opportunities arise.
Individual investors and traders can apply for a regular margin account with as little as $2,000, but there are rules regarding what's called a "pattern day trader." As defined by FINRA, a pattern day trader is one who executes four or more trades within five consecutive business days in a margin account. These accounts can only open and close a position three times within the same day during that five-day time frame, or else the account will be flagged, and will then need a minimum equity balance of $25,000 or more.
An investor with $25,000 in an account above and beyond any money needed to hold securities, if approved for margin, could have access to $100,000 of day trading buying power. However, if the account's equity drops below the $25,000 minimum for pattern day trading, that account could be subject to a minimum day trading equity call. The image below from the thinkorswim® trading platform highlights how investors can assess the impact of an individual trade before it's made.

Bottom line

Whichever investor or trader profile fits, it's important to remember that margin can be a useful tool if applied with prudent risk-management techniques. But it's not to be abused or trifled with. Margin offers a number of potential benefits, but it comes with distinctive risks that should be carefully considered.
Carefully read "The Charles Schwab & Co., Inc. Guide to Margin" for more details.