What is the interest rate on margin trading?

Asked 2 years ago

My father and I are launching ourselves right into the world of DeFi and margin trading. What is the interest rate on margin trading?

Karl Snider

Tuesday, July 26, 2022

Margin trading is a form of secured lending. In other words, when you apply for a loan from a brokerage firm to buy assets on margin, your loan is secured with the assets you purchase. In this case, margin trading lets you utilize leverage to increase your buying power and acquire more investments than you could with your own capacity.

Brokerage firms charge interest on margin loans. That is why these firms offer low or even zero commissions on margin trades. Since margin calculation varies from one broker to another, you should inquire from your broker directly if you can’t find their interest rates online.

Generally, to find the interest rate on a margin trade, you multiply the annual interest rate by the amount of your loan and the time limit of the loan.

Interest = (Rate/365) * Principal * Term

Rate = Interest rate per year

Principal = Loan amount

Term = Number of borrowing days.

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