In the 1929 Wall Street Crash, buying on margin let investors purchase shares with borrowed money.
Under margin buying, an investor paid part of a stock’s price and borrowed the rest, commonly through a broker. Rising prices could magnify gains, but falling prices magnified losses because the loan still had to be repaid. If a stock’s value dropped far enough, the broker could demand additional funds, creating a margin call.
Margin trading was not the only reason for the 1929 crash. Speculative enthusiasm, uneven economic growth, debt, and the structure of the financial system all mattered. Short selling is different: a short seller borrows shares and sells them, hoping to buy them back later at a lower price. Buying on margin refers specifically to using borrowed money to buy securities, not to every form of speculation.