The difference between using cash and using margin:

• If you invest in stocks just with the money you have in your brokerage account, you are using a cash account
  
• If you borrow money from the brokerage to invest in stocks, you are using a margin account -- you do not pay in full for stocks that you buy or sell.
  
• The collateral for borrowing the money is the marginable securities in your account, which means they are forfeit if you cannot pay the loan
  
• You also have to pay a fixed amount of interest on the borrowed money on a monthly basis, which can reduce your overall returns
  
• The risks associated with margin trading are also increased by leverage -- you lose twice as fast because there is less money backing the position.
  

• To try to double your returns (or to double your losses)
  
• The worst case scenario is when a stock price drops so much that it causes a "margin call," which means you either add more money to the account or you automatically get sold out of the position at a loss
  
• Remember, higher risk is how higher return comes about.  You can take your chances on things working out and getting a huge return, or things not working out and you take a huge loss.
  

• As a general rule, stocks selling below $5 are rarely marginable
  
• Government regulations and brokerages dictate which stocks are marginable, so you may want to ask your broker for help here.
  

• The amount that you can borrow is regulated by the brokerage as well as the Federal Reserve Board
  
• There are two requirements to this: