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Buying on margin is borrowing money from a broker to purchase stock. You can think of it as a loan from your brokerage. Margin trading allows you to buy more stock than you'd be able to normally.
With margin trading, you only need to put up a fraction of the total cost when you buy shares. Because you have borrowed money to buy shares, these shares would be held as collateral. For cash trading, you must have sufficient funds in your settlement account when you place a buy order.
Investors generally use margin to increase their purchasing power and leverage their investments, i.e. to magnify the returns on their investments. Despite the possible higher gains, however, investors who trade securities on margin may potentially incur higher losses.