 
Recognize the Risks
Margin accounts can be very risky and they are not suitable for everyone. Before opening a
margin account, you should fully understand that:
- You can lose more money than you have
invested;
- You may have to deposit additional cash or
securities in your account on short notice to cover market losses;
- You may be forced to sell some or all of the
securities in your margin account when falling stock prices reduce the value of your
marginable securities; and
- Your brokerage firm may sell some or all of
your securities without consulting you to pay off the loan it made to you.
You can protect yourself by knowing how a
margin account works and what happens if the price of the stock purchased on margin
declines. Know that your firm charges you interest for borrowing money and how that will
affect the total return on your investments. Be sure to ask your broker whether it makes
sense for you to trade on margin in light of your financial resources, investment
objectives, and tolerance for risk.
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