# NOOOB question about questrade



## joncnca (Jul 12, 2009)

i'm finally looking to open a non-registered account. i'm looking at the types of accounts and i don't see a normal, run of the mill non-registered account...

there's margin, registered, and FX/CFD....none of these seem to meet what i'm looking for

http://www.questrade.com/account/account_types

am i missing something???

thanks


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## FrugalTrader (Oct 13, 2008)

If it's non-registered you are looking for, open a margin account.


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## KaeJS (Sep 28, 2010)

Yes,

FT is correct.

I have an account with QT.

You want to open a Margin Account.


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## joncnca (Jul 12, 2009)

ok thanks. 

when i see margin, i think there's leveraging and i'm not looking to invest money i don't yet have


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## humble_pie (Jun 7, 2009)

really that's true? 
no cash accounts at questrade?
broker can borrow from margin accounts, at least from non-paid-up portion?

rrsp at questrade appears to be a tad safer imho


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## Tawcan (Aug 3, 2012)

It's called margin account for non-registered account, it doesn't mean you need to use margin though. Just make sure you purchase stock/ETF using only the cash you have on hand.


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## bds (Aug 13, 2013)

As long as you don't spend more than you have available in cash you won't use any margin. Also be careful about buying in USD if you only have CAD in your account - it automatically uses USD margin.


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## doctrine (Sep 30, 2011)

I use Questrade, and yes the non-registered accounts have margin by default. You can simply not use it, however, as Tawcan points out.


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## joncnca (Jul 12, 2009)

i guess you apply for a certain amount of margin, and when you place an order, you select either to purchase using cash or margin? something like that, huh?


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## andrewf (Mar 1, 2010)

You only use margin if you have no cash balance in your account.


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## humble_pie (Jun 7, 2009)

offering margin accounts only but no cash accounts would mean the broker would have greater opportunities to borrow stock from non-fully-paid-up accounts. 

statistically speaking there would be more of these.

from questrade's pov: excellent & profitable strategy.

from client's pov: registered accounts would be segregated, the margin account sector would be more at risk imho.

i'm surprised that large clients do not pressure edward kholodenko to hold a partial IPO so the books can be opened. Who knows, perhaps they are so pressuring ...


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## CanadianCapitalist (Mar 31, 2009)

It's odd that Questrade doesn't offer a cash account. Fully paid-up securities in margin accounts are supposed to be segregated from the firm's books just like cash accounts, so in theory there should be no difference between the two. Perhaps, Questrade is nudging its clients to trade on margin by making it the only option?


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## humble_pie (Jun 7, 2009)

CanadianCapitalist said:


> Perhaps, Questrade is nudging its clients to trade on margin by making it the only option?



yes i would imagine so.

it's interesting how an online business looks when one thinks of how it appears on the back side of the firewall.


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## Eclectic12 (Oct 20, 2010)

andrewf said:


> Tawcan said:
> 
> 
> > It's called margin account for non-registered account, it doesn't mean you need to use margin though. Just make sure you purchase stock/ETF using only the cash you have on hand.
> ...


So does this mean if one plans on paying for the trade a day or two after the buy - margin is triggered automatically as one did not have cash or accepted cash equivalents in the account?


Or to put it another way - does one have to ensure there is cash or equivalents for the full purchase price before making the buy?

Cheers


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## doctrine (Sep 30, 2011)

Yes, but this is obvious when making trades as they show you what your balances would be after the purchase and if any margin would be required.


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## Eclectic12 (Oct 20, 2010)

doctrine said:


> Yes, but this is obvious when making trades as they show you what your balances would be after the purchase and if any margin would be required.


It is certainly helpful to have the interface make it clear.

If I were to open an account that operates this way - it is a difference as currently when I buy a bargain, I don't bother with whether it's going on credit or a cheque (i.e. transfer cash) will be paying for it. I have up to three days to figure it out.


Not that this is a show stopper ... just that it requires different planning.


Cheers


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## joncnca (Jul 12, 2009)

humble_pie said:


> offering margin accounts only but no cash accounts would mean the broker would have greater opportunities to borrow stock from non-fully-paid-up accounts.
> 
> statistically speaking there would be more of these.
> 
> ...


is anyone then concerned about the safety of one's cash in a margin account, since everyone has a margin available to them?

how much is the margin...what's the limit, do you set the limit yourself or they approve you for some amount, based on what criteria? surely there must be some system like credit cards, to limit how much access you get.


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## Tawcan (Aug 3, 2012)

joncnca said:


> is anyone then concerned about the safety of one's cash in a margin account, since everyone has a margin available to them?
> 
> how much is the margin...what's the limit, do you set the limit yourself or they approve you for some amount, based on what criteria? surely there must be some system like credit cards, to limit how much access you get.


I haven't used margin even though I have a margin account. I believe the amount of margin is based on how much cash/securities you have in the account.

Here's more info:

http://www.questrade.com/pricing/margin_centre


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## joncnca (Jul 12, 2009)

oh boy, margin seems pretty dangerous without some discipline. do they make you do a credit check or anything, it seems like they shouldn't just be offering margin out to just anybody...i guess they can always make a margin call, but...still...that's a lot of borrowing they let you do

also, who's backing all this borrowed money?


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## Eclectic12 (Oct 20, 2010)

joncnca said:


> oh boy, margin seems pretty dangerous without some discipline. do they make you do a credit check or anything, it seems like they shouldn't just be offering margin out to just anybody...i guess they can always make a margin call, but...still...that's a lot of borrowing they let you do ...


That's why around 2000, there were articles in the G&M highlighting people who thought they "knew" technology stocks. The one article I can recall, the person being profiled was bemoaning turning something like $120K into $30K and was expecting their third margin call.


At the end of the day - it's a tool that if one misunderstands and/or misuses it, the results can be bad. 


Cheers


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## joncnca (Jul 12, 2009)

so in IQweb, is there a drop down menu where you select either CASH or MARGIN when you're making a purchase? how does the mechanism work?

also, who owns questrade inc...it's private, i gather. any idea how the company has done, other than the information they publish themselves?


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## KaeJS (Sep 28, 2010)

joncnca said:


> so in IQweb, is there a drop down menu where you select either CASH or MARGIN when you're making a purchase? how does the mechanism work?
> 
> also, who owns questrade inc...it's private, i gather. any idea how the company has done, other than the information they publish themselves?


In IQWeb, there is no drop down, or any other other form of "choosing" margin/cash. There is no "safety". It is a loaded gun.

If you have $100k in the account in cash, your amount with Margin is $300k.

IQWeb will display BOTH of these figures to you.

If you put in an order to buy 1000 shares at $100/share, you will only use CASH.

If you put in an order to buy 2000 shares at $100/share, you will use $100,000 worth of CASH and $100,000 worth of MARGIN.


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## KaeJS (Sep 28, 2010)

An easy way to think of how this works in Questrade is that it works like Overdraft would in a chequing account.


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## xTr1gger (Jul 17, 2013)

If you have to ask that kind of question in the first place you should probably not be signing up for a margin account.


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## Eclectic12 (Oct 20, 2010)

xTr1gger said:


> If you have to ask that kind of question in the first place you should probably not be signing up for a margin account.


The OP & responses were that for this broker it is a combined cash & margin account. So the only way to deal with it is to be aware of what triggers the margin so that one can avoid it.


Cheers


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## trophy_23 (Jan 31, 2014)

This is the explanation I got from Questrade when I opened my account and wanted to clarify how the margin worked. I don't intend on using anything beyond the cash I have in the account, but wanted to know anyways.



If you were to place a trade that brings your cash balance into a debit (below $0) then you will be borrowing that cash from Questrade incurring interest on a daily basis.

Interest is calculated daily but only charged to your account once per month. This is similar to a bank line of credit. But we only start charging interest on the night your trades settle. So stock trades settle 3 days after your trade is filled. So technically you can borrow money for one day - sell the stock the same day and then pay no interest because the interest only starts on the settlement night.
Our current interest rates are:
CAD >> 6 % per year
USD >> 6.25 % per year

For more information please refer to the following website: http://www.questrade.com/pricing/interest_rates


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## humble_pie (Jun 7, 2009)

jonca you're quite right to ask these questions & you can see where others have offered wise, careful answers. One poster in message # 18 upthread points you to the spot on questrade's website where they discuss margin accounts, so you know where to go & study!

from what i read here, the questrade platform clearly indicates available cash balance plus available margin - some firms call it "buying power" - so you & all questrade clients would be able to avoid margin usage if you wanted to do that, simply by restricting orders to the amount of cash that is present.

however, from a larger perspective, one can see advantages for any broker that would offer margin accounts only. Human beings being what they are & especially young/new investors being what they are, it is likely that more clients at an all-margin brokerage will run over their cash limits now & then. In other words, there would be greater margin usage than would be the case if cash accounts were also available.

margin lending in turn gives the broker a bigger inventory of shares that can be borrowed in order to lend them out to short-selling clients.

this i tend to believe is questrade's true intention. Having as many shares as possible available at the loan post for shorting purposes.

does this activity make this broker somewhat less secure? it's not possible to know or say anything, because this brokerage is privately owned & the books are not open.

this is why i've thought that the founder/entrepreneur of questrade might consider an IPO to sell off a small portion of his holdings. This action would open the books, which in turn might attract some large new institutional or other clients who might otherwise hold back on dealing with an unknown entity.


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## richard (Jun 20, 2013)

xTr1gger said:


> If you have to ask that kind of question in the first place you should probably not be signing up for a margin account.


Questrade (and some other brokers I believe) don't really make this clear... plus he doesn't want to use margin so there's not much risk.

Since margin use would likely require a separate credit approval, maybe there's an option in the application form to not go through that. Either way, if you don't try to spend more than the cash you put in (and account for commissions where necessary) there's not much danger. The hardest part is if you're using mixed currencies since it might settle at a rate that you don't know when you make the trade. Also if you're guessing at how many share you can buy some brokers will let you go a little over the available cash even in a non-margin cash. I saw this in a TD RRSP account last year and had to make a quick deposit to make them happy. Trust your own numbers and you'll be ok


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## richard (Jun 20, 2013)

joncnca said:


> how much is the margin...what's the limit, do you set the limit yourself or they approve you for some amount, based on what criteria? surely there must be some system like credit cards, to limit how much access you get.


For typical stocks and funds, a typical margin limit will allow you to buy twice as much as the cash you have. That puts you right at the limit so if there's any decline you would need to add more cash. There are a lot of variations, and each broker is different. With some very liquid stocks you can buy 3x your cash - search for "IIROC LSERM" to see which ones. Stocks with low prices might not allow you to borrow at all. Apparently with some bonds you can buy 10-20x your cash, just like real estate.

I'm not sure if that limit is further restricted based on your personal credit. If you pass the limit the broker will start selling off your investments to pay down the margin loan so they should be able to recover it all. With stocks it would take a loss of 30-50% before the portfolio value falls below the margin loan and they won't wait around for that to happen. It's set up so they can protect themselves even if you can't put in more cash.


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## Eclectic12 (Oct 20, 2010)

richard said:


> Questrade (and some other brokers I believe) don't really make this clear... plus he doesn't want to use margin so there's not much risk...


I'm not so sure about the risk part ... from what's up thread, having a buy order go through while the cash balance is zero is enough to trigger margin. This is an action I do all the time and it doesn't trigger my margin account. It's the whole idea of T+3 in a cash account where payment isn't due until three days after the buy.

Now there's a limit to the risk as hopefully if one had planned to use cash - it won't be difficult to deposit the cash and pay off the likely small margin interest.




richard said:


> ... I saw this in a TD RRSP account last year and had to make a quick deposit to make them happy ...


 ... or it could be a feature of what's being held in the account. 

So far, the only trades I've had go through in an RRSP brokerage account are one of two situations. The most common case is that there was enough cash. The second case was where I held a HISA MF which when added to the cash balance, was enough to cover the purchase. 

All of which is a good reminder to understand what the privileges are ...


Cheers


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## joncnca (Jul 12, 2009)

Thanks everyone for your thoughtful responses. Ive looked at the link an some other resources briefly and have an idea of some basic terminology. 

Most stocks have 30 percent margin, so you only need 30 of 100 dollars in cash, that's where the 3x comes from 

I'm just trying to get an idea of what the margin interface looks like, and how to control it. Thanks for the insights.

Of course I would keep track to spend only cash, I would no more likely exceed cash than I would be to exceed my credit card limit. But it would be nice if they separated cash from margin in the interface. Sneaky way to get you to spend more, much like so called overdraft protection, haha 

Actually I realized that all applications for accounts at questrade require you to authorize credit check, even registered accounts.....but they probably only run it for margin accounts of even those


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## KaeJS (Sep 28, 2010)

joncnca said:


> Most stocks have 30 percent margin, so you only need 30 of 100 dollars in cash, that's where the 3x comes from
> 
> But it would be nice if they separated cash from margin in the interface. Sneaky way to get you to spend more, much like so called overdraft protection, haha


Any stock over $2 will allow you a 3x leverage on margin.

Also, joncnca, don't worry so much about it. Just open the account - you will be glad the margin is there when you actually start to trade. Most people will disagree with my strategy, but margin is a fantastic source of funds when that stock you buy at $35 drops to $32 unexpectedly 

It's not necessarily all that sneaky. It clearly states "Cash" and "*Buying Power*" when you look at your balances. Buying Power is even listed in BOLD so you know what's what.

Example:

Cash: *Buying Power:*

$300 $900


It will clearly tell you what you have access to.

If you don't want to use margin, just make sure that the value of shares you are buying does not exceed your cash portion.
You can always view both of these balances right on the main interface within IQWeb, so you can always do a quick calculation before buying shares.

In fact before you do your final submission in IQWeb, it will pre-calculate this for you.

Good luck.


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## richard (Jun 20, 2013)

Eclectic12 said:


> ... or it could be a feature of what's being held in the account.
> 
> So far, the only trades I've had go through in an RRSP brokerage account are one of two situations. The most common case is that there was enough cash. The second case was where I held a HISA MF which when added to the cash balance, was enough to cover the purchase.
> 
> All of which is a good reminder to understand what the privileges are ...


I got an email the next day saying I was using credit in a registered account and had to pay it back within 3 days. Other than accidents like that I have never bought anything without having the cash in the account already. I'm too accustomed to slow transfers. Maybe Questrade doesn't charge margin interest until after the trade settles but I never thought to ask. Their margin interest rates are too high anyways. If you trade on margin there you're at risk of over-paying.


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## Eclectic12 (Oct 20, 2010)

richard said:


> I got an email the next day saying I was using credit in a registered account and had to pay it back within 3 days. Other than accidents like that I have never bought anything without having the cash in the account already ...


Interesting ... 




richard said:


> ... Maybe Questrade doesn't charge margin interest until after the trade settles but I never thought to ask...


If so - it appears this is a recent change as up thread a quote is that:


> This is the explanation I got from Questrade when I opened my account and wanted to clarify how the margin worked ...
> If you were to place a trade that brings your cash balance into a debit (below $0) then you will be borrowing that cash from Questrade incurring interest on a daily basis. Interest is calculated daily but only charged to your account once per month...


So it seems that different brokerages use different mechanisms to trigger the use of margin.


Cheers


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