How is it possible? I thought you can only lose what you put in. So 100% max. But I’ve seen news and posts about how people lose much more than that.
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There are a few ways, but the most common by far is called leverage. Put simply – You borrow money to invest with and invest your money AND the borrowed money. If the stock goes down so much that you can’t pay back the money you borrowed you can owe more than you put in. People who “lend” to others who use this strategy almost always make what’s called a “margin call” before it gets that far which essentially means “Hey before you lose all your money and then some, we are requiring you to pay us back first”
It’s impossible to get “tricked” into making this mistake. Before even being allowed to trade on margin (loaned money), you have to jump through extra hoops to demonstrate that you understand what you are doing and the risks involved.
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