Anyone interested in a margin account should Google: margin accounts - stocks. Excellent information is available. Also, if you have an account at any brokerage firm, check to see what they offer. Some will offer Planning/Investment basics. If you have a regular account, you can ask to have it changed to a margin account.
When you have a margin account only the stocks that you order that you don't have enough cash to cover will be bought on margin. The only margin available to you will be based on the amount that you have invested in stocks over $3.00. Should you have, say, $50,000 in stocks, or in a stock over $3.00, your brokerage firm will allow you a certain % of that to buy more shares. You can invest the money in penny stocks if you wish. Your call. You are borrowing their money to "gamble". You are allowed a certain number of days before you have to pay the money back.
Case scenario: I bought X number of PRB, (36 cents per share), on margin. The stock went up. I got out at a profit of six cents per share without using a cent of my own, ( I've got in and out of PRB a few times). Now, if the stock was going down, I would watch it closely and only allow a few cents loss before I sold and took a loss. However, if you think you have a good thing, and it will maybe take more than the allotted payback time, you can do one of two things: (1) Pay interest on the loan, (because that is what buying on margin is - a loan); (2) Make sure before you buy, that in the latter case scenario, you have other stocks in your portfolio that you can sell at a profit (maybe one you have been holding for better profits) to cover the loan. Sometimes you have to be a pretty good juggler; and don't go to far away from your computer.
TFSA, and SDRIF accounts do not have margin availability.
In my opinion, a good brokerage firm will not sell your shares without your permission and the SC requires that they have those shares available for your trading, unless you are in default. Putting in a high sell order is not permitted by some brokerage firms,(maybe all).
I stand to be corrected but I checked this out thoroughly.
I have both USA and Canadian margin accounts.
Respectfully submitted,
Gleegee.
