Getting Started with Margin Trading: A Practical Guide

Imagine you've done your research and feel confident about a stock—let's call it Stock A—currently trading at $100 per share. You expect its price to rise to $150 within three months.

You have $10,000 in cash in your account, which allows you to purchase 100 shares worth $10,000. To increase your buying power, you decide to use margin trading. By pledging the assets in your account, you obtain an additional $10,000 in margin buying power from the brokerage platform moomoo, enabling you to purchase a total of 200 shares.

Two months later, Stock A rises to $150. You decide to sell, and your stock position is now worth $30,000. After paying back the $10,000 loan, you're left with $20,000—doubling your initial $10,000 for a 100% return.

(*Note: This is for illustrative purposes only; margin interest charge, trading and settlement fees, and other costs are not included.)

That's the potential of margin trading—using leverage to unlock the possibility of higher returns.

However, leverage amplifies both gains and losses, and margin loans accrue interest costs. It's essential to fully understand how margin trading works and assess your risk tolerance before you begin.

In this article, we'll explore together how you can begin your margin trading journey with moomoo.

1. How Does Margin Trading Work?

Margin trading allows the investor to use cash and Marginable Securities already held in a Margin Account as collateral to increase Buying Power(BP) to invest more financial products.

2. What Is Cross-Currency Trading on Margin?

At Moomoo MY, you may enjoy Cross-Currency Trading by investing in foreign-currency securities (e.g., US stocks or Hong Kong stocks) without holding the foreign currency cash.

How It Works:

When purchasing foreign-currency securities that exceed your available cash balance in the settlement currency, the system automatically processes your order in one of the following ways:

(1) If you have sufficient equivalent cash in MYR (Malaysian Ringgit):

→ Auto-exchange

You may proceed with the purchase of foreign-currency securities. Once the trade is settled, the equivalent amount in MYR will be automatically converted into the settlement currency to cover the deficit.

(2) If you do not have sufficient MYR cash but have sufficient buying power:

→ Auto-exchange + Auto Financing

Your available MYR cash will be reserved for currency conversion. Any additional amount required will be financed through margin borrowing in MYR. After settlement, the combined amount (your MYR cash + the borrowed MYR) will be converted into the settlement currency to cover the deficit.

Note: Exchange rates are determined by upstream. You can check the executed rate from the statements.

3. Setting Up a Margin Account

To start margin trading, you need to open a Margin Account. The margin feature is typically enabled by default, but you can verify or adjust this setting in the moomoo app by heading to:

Me> Settings> Account & Positions> Margin Settings

Note: If the margin feature is disabled, you will be limited to trade on cash basis only and unable to access to margin-related features:

• Securities margin financing

• Short selling

• Options trading

• Futures trading

• IPO subscriptions with margin

• Cash Plus holdings will not be included in your buying power

4. Understanding Maximum Buying Power

Maximum Buying Power (Max BP) represents the total funds available in your account to purchase securities. It combines your available cash with the maximum margin you can borrow. The actual amount of maximum buying power that can be utilized depends on the specific securities being bought.

You can check Cash Buying Power and Max Buying Power on the Accounts page.

Once you've checked your available Buying Power(BP), the next step is to determine how many shares you can actually purchase.

At the bottom of the order placement section, you'll find two figures: Max Buy Qty (Cash) and Max Buy Qty (Margin).

These figures are automatically calculated based on the specific stock, the order price entered and your available funds. When your order amount exceeds your available cash and triggers margin financing or cross-currency trading, a label will appear indicating “Using margin to buy” or “Using cross-currency trading to buy”, as an option for users to consider, subject to different scenarios.

5. Which Securities Are Marginable?

Not all securities are eligible for margin trading. You can check which ones are marginable using the following methods.

Method 1: On the stock quote page, look for the "Marginable" icon.

Method 2: Go to Markets > Select a market (such as MY) > Choose "Margin" to view a list of all securities eligible for margin trading in that market.

6. Checking Margin Requirements and Rates

Margin trading allows you to leverage your investments by depositing only a percentage of the transaction value, known as the margin requirement, instead of the full amount when opening a position. Margin requirements vary depending on the securities traded.

Click HERE to learn more about margin interest rate calculations.

If you want to buy a stock with a market value of $1 million, and the stock is non-marginable, the initial margin requirement is 100%, meaning you need $1 million in buying power to establish the position (at 1x leverage). However, if the stock is marginable—for example, with an initial margin of 35%—you only need $350,000 Cash Buying Power in your account. The balance $650,000 is borrowed from moomoo MY, allowing you to buy with 2.85x leverage.

7. IPO Subscriptions on Margin Financing

Initial Public Offering(IPO) subscription may require a large amount of capital. At moomoo, instead of subscribing with only cash, you can use the Max Buying Power of your account to subscribe for more IPO shares. Upon subscription, your fund and/or buying power will be temporarily frozen without incurring interest.

If your IPO application is successful, the allotted amount will be deducted from your account. If the allotted amount exceeds your available cash, the excess will be financed with interest.

The "Buying Power" shown in the subscription section reflects your current Maximum Buying Power.

Learn IPO Subscriptions steps at HERE.

8. How to Check Your Outstanding Margin Loan？

You can check if your account has any outstanding Malaysian Ringgit (MYR) loan on the Account page. A negative amount indicates that your account currently has an outstanding loan.

Note: This is a projected loan amount. For the actual loan amount and interest charges, please refer to your account statement.

9. How to Repay Your Margin Loan

You can repay your margin loan through the following methods:

Depositing funds

Funds deposited on T-day are considered settled and will be automatically prioritized for margin loan repayment. The repaid portion will stop accruing interest from T-day onward.

If you've used margin to purchase foreign stocks (e.g., U.S. stocks), the system will automatically convert MYR to USD on the next settlement day to cover the outstanding amount. If there are insufficient MYR funds in your account to cover the USD settlement amount, your MYR balance will turn negative and begin accruing interest in MYR.

Sell Securities

You may opt to sell securities to repay your margin loan using the proceeds from the sale. Once the sell transaction has settled, the funds received can be used to reduce the outstanding loan balance. As the loan is denominated in MYR, you may need to convert any excess foreign currency cash into MYR to cover any deficit amount.

By using margin prudently, we can amplify returns during market upswings. However, it's important to maintain proper position sizing and stay alert to market risks to avoid potential losses during downturns.