# Trading on margin

### How Margin Works <a href="#h_416cfad8ab" id="h_416cfad8ab"></a>

Margin trading allows you to trade securities with a value that exceeds your account cash balance, as the funds are loaned to you by Alpaca with a standard limit of 2x buying power. So for example, an account holding $10,000 cash may purchase and hold up to $20,000 in securities overnight.

### Initial Margin <a href="#h_5c14fc30b8" id="h_5c14fc30b8"></a>

The initial margin is the percentage of the trade price of a security that a trader must pay from the available cash in the margin account when the trade is opened. Alpaca applies a minimum initial margin requirement of 50% for marginable securities so using the same example, for a position size of $10,000 initial margin of $5,000 is required.

### Maintenance Margin <a href="#h_f423bcbc6e" id="h_f423bcbc6e"></a>

The maintenance margin is the amount of cash or marginable securities required to continue holding an open position. In the US, FINRA has set the minimum maintenance requirement based on the price and the total market value of the securities. Here is a simple table that Alpaca uses to calculate the overnight maintenance margin.

| Position | Condition            | Margin Requirement             |
| -------- | -------------------- | ------------------------------ |
| Long     | Share price < $2.50  | 100% of EOD market value       |
| Long     | Share price >= $2.50 | 30% of EOD market value        |
| Short    | Share price < $5.00  | Greater of $2.50/share or 100% |
| Short    | Share price >= $5.00 | Greater of $5.00/share or 30%  |

### Margin calls <a href="#h_41a70e4448" id="h_41a70e4448"></a>

If your account does not meet the initial and maintenance margin requirements you will receive a margin call so that you can either deposit new funds or liquidate some or all of your positions to reduce your margin requirements accordingly.

{% hint style="info" %}
Calculating and tracking your margin requirements at all times is an essential part of trading. To avoid receiving a margin call or getting positions liquidated we strongly recommend doing so if you plan to aggressively use
{% endhint %}


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