You think the price of IBM stock will rise. You can undertake traditional share transaction and physically buy 200 shares of IBM trading at US$165.00 per share. This would require $33,000 ($165 X 200 shares), not including any commission charged by the broker. You were correct and the price goes up to $185 per share, so you sell your shares making $20 profit per share and therefore realizing $4,000, (approx 12% profit on your investment).
Now, when you trade on margin with companies such as HY Markets, you take a position on the price of IBM, and put up a small portion of the underlying value, (known as margin requirement or risk amount), without buying the shares outright. In this example, you take a Buy position of 200 shares at $165 per shares and the minimum amount required for this trade is $3,200. The price goes up to $185 per share and you close your position and you still make $20 per share profit and realize $4,000, (125% profit on your investment).
In summary, the major difference is that the physical share trade requires payment of the full US$33,000 (plus commission) to enter the trade, whereas with margin trading you take a position of equivalent size and only deposit US$3,200, therefore accessing higher exposure and higher potential returns.
For details of margin requirement and risk amounts of our products please view our Product Specifications
* Please note Margin Trading carries a high level of risk. Please view our Risk Warning before trading