Risk Warning: Margin Trading Carries High Risks—Invest Within Your Means

Margin trading is essentially a leveraged transaction where investors use cash or securities as collateral to borrow funds from brokerages to purchase stocks. While it amplifies potential gains, it also magnifies risks proportionally.

Margin trading is a double-edged sword. When market trends align with investor expectations, leverage can generate additional returns. However, if the market experiences sharp volatility and stock prices fall, investors not only bear losses on their own capital but must also repay borrowed funds plus interest.

Li Qiusuo, Chief Domestic Strategist at CICC Research: "Thus, it is more suitable for investors with relatively high risk tolerance who can withstand potential drawdowns."

Reporters noted a significant increase in new margin trading accounts. As of now, the number of individual investors in the margin trading market has reached 7.5568 million, up by 582,200 since September 24, 2024.

Chen Li, Chief Economist at Chuancai Securities: "Given the surge of new investors entering the market, brokerages should strengthen warnings about margin trading risks and account eligibility requirements to ensure investors fully understand the rules and risks."

Tian Lihui, Dean of the Institute of Financial Development at Nankai University: "Additionally, the continuous rise in margin balances tests brokerages’ operational capabilities. They must prepare for risks from market fluctuations and ensure sufficient funding capacity for clients."

Experts also caution that margin balance fluctuations move in sync with the market but are not predictive.

Chen Li: "Investors should not base decisions solely on changes in margin balances but must consider macroeconomic conditions, industry fundamentals, and other factors."