2026Exhibition Trade Overview Concept
What is margin trading?
Margin trading is a type of transaction in which investors borrow funds to invest, seeking higher returns by capitalizing on price fluctuations. The following are key concepts related to margin trading:
Borrowed funds
In margin trading, investors can borrow funds from a trading platform or broker to purchase large quantities or substantial amounts of assets, such as stocks, cryptocurrencies, and more.
Security deposit
Investors are required to deposit a certain amount of funds on the trading platform; this sum is referred to as margin, which serves as collateral for borrowed capital.
Leverage effect
Investors can use leverage to trade, meaning they can purchase larger‑sized assets with a smaller amount of capital.
For example, with 10x leverage, an investor needs to post only 10% margin to trade assets worth 10 times their capital.
Risk and Return
Margin trading offers substantial potential profits, but it also amplifies risk. In a downturn, investors may incur losses exceeding their margin deposits, resulting in significant financial setbacks.
Close-out risk
If the margin is insufficient to support the position, the trading platform may initiate a forced liquidation, automatically selling the asset when market conditions turn unfavorable to limit losses.
Margin loan ratio
The margin loan ratio refers to the proportion of borrowed funds to an investor's own capital in margin trading. This ratio helps investors assess their level of leverage and potential risks.
Margin Ratio: Margin Ratio = Borrowed Funds / Margin; Margin Ratio = Margin / Borrowed Funds
Margin Requirement: Typically set by the trading platform or broker, it represents the proportion of the total transaction value that the investor must fund with their own capital.
Suppose an investor wishes to purchase $10,000 worth of assets on margin, and the broker requires a margin ratio of 20%. Then:
Margin = 10,000 × 20% = $2,000
Borrowed funds = $10,000 − $2,000 = $8,000
Leverage ratio = $8,000 : $2,000 = 4
This means the investor's leverage ratio is 4:1, implying that for every $1 of equity, the investor controls $4 worth of assets. However, a higher leverage ratio entails greater financial leverage. While higher leverage can amplify profits, it also increases risk. If market prices decline, the value of the investor's holdings may fall, triggering a margin call—requiring the investor to either deposit additional funds or liquidate positions.
What is a Call Margin Call?
A Margin Call, also known as a "Call on Margin," is a notice issued by a broker to an investor, requiring the investor to deposit additional funds to meet margin requirements. Before engaging in margin trading, each broker sets a minimum margin requirement for every investor, aiming to ensure that the account maintains a certain level of equity. When the net equity in an investor's account falls below this threshold, a Margin Call occurs. At that point, the investor can respond in one of three ways:
Adding to the position:
Investors may add funds to their account by depositing additional capital to meet the minimum margin requirements.
Closing a position:
If an investor is unable or chooses not to inject additional funds, the broker may initiate a forced liquidation, automatically selling some or all of your positions to prevent further losses.
Adjust Position:
Investors may choose to reduce their positions to lower margin requirements.
When the market price of an asset you hold falls to a certain level, investors should sell it immediately—this is known as "cutting losses." Not only does this help avoid further losses, but it also frees up capital tied up in underperforming holdings, allowing you to reallocate funds to other investment opportunities with greater potential.
Where can I conduct margin trading?
On Futu, you can not only trade individual stocks easily, but alsoMargin trading。
Advantages of Margin Trading
With Futu's "margin trading," you can enjoy five major advantages:
1. DiscountMargin loan interest rate(Annual Interest Rate): Low rates effectively reduce investment costs. The annual interest rate is calculated on a 365-day year, based on calendar days. It is adjusted periodically to reflect changes in currency exchange rates.
Futu's margin loan annual interest rate in major global markets | |
Hong Kong stocks | 6.8% |
U.S. stocks | 4.8% |
3.8% | |
A-shares | 8.8% |
Singapore stocks | 8.80% |
2. Enhance purchasing power of assets: By leveraging, you can maximize potential returns.
3. Short Selling of Hong Kong and U.S. Stocks: Supports a variety of securities‑shorting transactions, enabling you to capitalize on market downturns.
4. Unified Purchasing Power: Enables cross-market trading without currency conversion, helping you sidestep exchange-rate volatility risks.
5. Same-Day Margin Trading with 0% Interest: Designed specifically for short-term traders, enjoy zero interest on same-day trades to help amplify your potential returns!
How do I open a margin account and execute margin trades?
Go toFutu official websiteand register a new account.(Register Now)
Open a comprehensive account with Futu, click "Open Account Now" below, and enjoy an opening reward of up to one thousand yuan.(How to Open an Account)
New customers can see the account selection when opening an account on the Futubull App. You can use this option to decide whether to apply for a margin and short-selling account.
Meanwhile, existing customers with cash accounts can upgrade through the Futubull app. Tap [Account], then select the cash account you wish to upgrade, followed by tapping [Free Upgrade] and submitting your upgrade request. Typically, the upgrade is completed within one business day.
