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WHAT IS PORTFOLIO MARGIN?

Can you explain what portfolio margin is? I’m told it’s better than pattern daytrader margin, but what is the difference? —Tntrdr

Some brokerages offer their bigger accounts, usually $100,000 or more, access to what is referred to as portfolio margin. This is 15% in most cases. So, with $100,000, you may be able to use $600,000 in capital. However, there are other risk margins that may apply as well, which would dramatically lower your access to capital. The problem arises when you don’t know ahead of time exactly how your broker will define your portfolio’s risk, day to day. Hope that helps.

Originally published in the September 2012 issue of Technical Analysis ofStocks & Commodities magazine. All rights reserved. © Copyright 2012, Technical Analysis, Inc.