This has become a destructive misconception because most investors misinterpret it to mean accumulate shares that have fallen significantly in price. Whatever the reason for its appeal and widespread popularity, no myth is more pervasive among amateur investors, encouraging them to load up on shares that have recently lost a large portion of their value. Rarely do they try and scoop up some 'bargain' that recently took a nose dive, because troubled stocks always have a way of going even lower. I Would Gladly Pay You Tuesday For A Hamburger Today Oddly enough, some traders think that buying on margin is not highly risky. This is one of the most dangerous, and potentially damaging methods of trading.
Brokers have some pretty 'evil' loan terms and policies.
Since your loan is ensured by the value of the stocks you buy with the borrowed money, a drop in the price of the equity suddenly leaves you without enough assets to cover the loan amount. This is when the trouble starts, as you then need to provide additional cash. So your broker starts selling off some of the stock from your account to cover their own interests, whether or not you had intended to sell the shares then or not. It gets even uglier, but we'll leave the rest for the brave few to learn the hard way. Perhaps you believe a trade deficit is the result of bad fiscal policy, or that it indicates a troubled economy.