Here’s a clear, practical breakdown of how margin trading differs from regular (cash) trading — what each means, how they work, costs, risks, and when to use them.

1. Basic definitions

• Regular (cash) trading: You buy securities using only your own cash (or fully-paid funds). You hold them until you sell; no borrowing from the broker.
• Margin trading: You borrow part of the purchase price from your broker using your existing holdings or cash as collateral (the “margin”). This lets you buy more than you could with your cash alone (leverage).

2. How they work (mechanics)

• Regular:
  • Place order → broker executes → you pay full amount from your account.
  • You own 100% of the purchased shares.
• Margin:
  • You must open a margin account and meet an initial margin requirement.
  • Broker lends you money to buy securities; you pay interest on the loan.
  • Your purchased securities (and sometimes other assets in your account) act as collateral.
  • If account value falls, broker can issue margin calls or liquidate positions.

3. Leverage and buying power

• Regular: Buying power = cash in account.
• Margin: Buying power = cash + (borrowed amount). Leverage multiplies exposure; e.g., 2x leverage means you control twice the position for the same equity.

4. Costs

• Regular: Brokerage/transaction fees and taxes (stamp duty, STT in India, capital gains taxes).
• Margin: Same fees + interest on borrowed funds + possibly higher maintenance/brokerage fees. Interest accrues daily and increases holding cost.

5. Risk profile

• Regular: Loss limited to the amount you invested (shares can go to zero). No interest/forced liquidation by broker for borrowing.
• Margin: Amplified gains and losses. If the market falls, losses affect both your equity and borrowed amount. If equity falls below maintenance margin, broker can issue a margin call or liquidate positions without your consent. You can lose more than your initial cash invested.

6. Margin calls and liquidation

• Regular: No margin calls.
• Margin: If account equity < maintenance requirement, broker asks for more funds (margin call). If you don’t add funds, broker may sell your securities (partial/full) to bring account into compliance. Different products and brokers have different rules and timing.

7. Typical uses / common products

• Regular: Buy-and-hold investing, long-term investing, ETF/stock purchases.
• Margin: Short-term trading, increasing position size, short selling (in many markets you borrow shares to sell short), day trading, trading derivatives (futures/options often use margin but work differently — margin for derivatives is performance bond, not a loan in the same way).

8. Suitability & investor profile

• Regular: Suitable for most retail investors and long-term investors who prefer simpler risk.
• Margin: Suitable for experienced traders who understand leverage, risk management, and can handle volatility and potential margin calls.

9. Example (simple numbers)

• Regular: You have ₹100,000. Buy 100 shares at ₹1,000 each → cost ₹100,000. If price rises to ₹1,200, your gain = ₹20,000 (20%).
• Margin (2x): Same ₹100,000 equity, broker allows 2x leverage → buying power ₹200,000. Buy 200 shares at ₹1,000 = ₹200,000 (you borrow ₹100,000). If price rises to ₹1,200, position value = ₹240,000. After repaying ₹100,000 loan, equity = ₹140,000 → gain ₹40,000 on ₹100,000 original (40%). If price falls to ₹800, position value = ₹160,000 → after repaying loan ₹100,000, equity = ₹60,000 → loss ₹40,000 (40%). Plus interest on loan reduces returns further.

10. Key practical differences summarized

• Ownership: Regular = fully owned; Margin = partly financed, collateralized.
• Leverage: Regular = no leverage; Margin = leverage (higher risk/reward).
• Costs: Margin adds interest/possibly higher fees.
• Risk control: Margin requires active monitoring to avoid margin calls/liquidation.
• Use case: Regular for long-term investing; Margin for active/short-term trading or short selling.

11. Safety tips if using margin

• Know your broker’s margin maintenance levels and margin-call process.
• Use stop-losses and position-sizing: never risk more than you can afford to lose.
• Factor interest cost into expected returns and time horizon.
• Prefer margin for shorter-term trades you monitor daily rather than long-term holdings.
• Keep extra cash buffer in the account to meet possible margin calls.

12. Regulatory & tax notes (general)

• Margin rules, leverage limits, interest rates and maintenance margins vary by country and broker. In India, brokers follow exchanges/SEBI rules and margins depend on product (cash, intraday, F&O) — check your broker’s margin schedule and the exchange circulars for specifics.
• Taxes (capital gains, STT) still apply on trades regardless of margin usage.

If you want, I can:

• Show a worked example with numbers you provide.
• Compare margin rates and typical maintenance margins from a few Indian brokers (I can look up current specifics if you want — note: that requires checking live broker pages).