In a nutshell, margin trading means buying securities with borrowed money.
As you can imagine, this can be very risky as you are liable to lose not only your money but Webull's money as well.
While the trading platform Webull does allow margin trading, there are a number of important details you should be aware of before getting started.
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Margin accounts let you borrow money against the value of the securities in your account.
This allows you to access increased funds without having to sell off all the assets in your current portfolio.
It's vital to remember that when you use a margin account, you open the door for both major profits and huge losses. This is because it's possible to lose not only the value of the securities in your cash account, but also the funds you borrowed.
If you start to show losses that are greater than the limit set by the broker, this can lead to a margin call. When this happens, the brokerage platform can force the sale of securities or other assets in your account. The firm can also sell your securities or other assets without contacting you. You are not entitled to a time extension while in a margin call.
You will also pay interest on your margin account. Interest is charged on the actual borrowed amount, accrues daily, and is typically paid monthly.
| Feature | Cash Account | Margin Account |
|---|---|---|
| Leverage | None | Up to 4x (day trading power), 2x (overnight) |
| Minimum Equity | $0 | $2,000 |
| Day Trading Limits | Unlimited (with settled funds) | Limited to 3 day trades per 5 trading days if equity < $25,000; unlimited if ≥ $25,000 |
| Risk | Lower | Higher |
Cash accounts allow you to day trade with money you have readily available. For example, if you have $1,000 settled in a cash account, you can only use up to the amount of $1,000 for trades, not a penny more.
Margin accounts allow you to borrow money against the value of the securities in your account. For example, a margin account with $2,500 in equity may provide up to $10,000 in day-trading buying power (4x leverage), but the overnight buying power is capped at $5,000 (2x leverage).
This provides the opportunity to leverage your investment to potentially increase your returns. At the same time, it presents the risk of magnifying your losses.
Webull is a commission-free stock and ETF trading platform launched in 2017. Today, it has nearly 10 million users across the U.S. and internationally.
When you sign up to buy and sell stocks on Webull, you will not be charged any commission. There are also no minimum account requirements or account maintenance fees for cash accounts, making Webull one of the lowest cost brokers available.
A Webull individual margin account allows you to borrow and trade with up to 4x day-trade buying power and 2x overnight buying power, subject to account equity and regulatory requirements.
For example, with $2,500 equity, you may access up to $10,000 for day trades, but overnight buying power is limited to $5,000.
Keep in mind, there are account minimums and you will pay interest on the borrowed funds. Margin trading carries high risk and is recommended only if you fully understand those risks.
| Margin Balance | Standard Rate (Approx.) | Webull Premium Rate (Approx.) |
|---|---|---|
| Up to $25,000 | ~12.07% | ~8.74% |
| $25,000 to $100,000 | ~11.08% | ~8.74% |
| $100,000 to $500,000 | ~10.83% | ~8.74% |
| Above $500,000 | Varies | ~8.74% |
It's important to understand the potential risks associated with margin trading before you consider taking this step.
Margin trading can make you or break you! It can amplify losses as well as gains. If you plan to use margin, make sure you understand the risks and always monitor your accounts carefully, especially during volatile market conditions.
Some key risks include:
This type of trading is tailored primarily for experienced, active day traders who buy and sell securities multiple times in a day.
If your margin account equity is below $25,000, the Securities and Exchange Commission (SEC) limits you to 3 day trades within a rolling 5-business-day period. Crossing this threshold labels you as a Pattern Day Trader, which may lead to account suspension or restrictions. Accounts with equity above $25,000 face no such limit on day trades.
To avoid violating PDT rules, use Webull's tools to track your day trades and stay compliant.
On the Webull platform—or any other brokerage—buying on margin is not recommended for new investors or those pursuing a long-term, passive investment strategy.
If the stocks or options in your margin portfolio decline in value, you risk losing all the borrowed money, and you may be forced to sell your securities to cover the losses. Stock prices can go up and down unpredictably, so caution is essential.
Margin trading on Webull, as with any other platform, can be tempting but must always be used carefully. Protecting your assets is paramount, and trading on margin exposes you to greater financial vulnerability.
With thorough research and understanding, you should now have a clearer overview of how margin trading works on the commission-free Webull app.
Remember, Webull margin accounts allow trading in stocks, ETFs, options (including advanced strategies), and participation in IPOs, providing extensive product access across multiple devices. Customer service is available during business hours to assist with any questions.
