Understanding the strengths and weaknesses of each kind of account is important when trading or investing in Canada.
Questrade margin account is a non-registered account. Any gains are subject to taxes while losses may be eligible for tax deductions. Questrade margin accounts have no limit on the number of trades.
How Questrade Margin Works
Questrade margin works as a non-registered account in Canada with no limit on the amount of deposits and withdrawals. Questrade margin account gives an option to borrow funds to buy more stocks or other assets. Borrowing money on a Questrade margin account is optional.
Questrade charges interest on the money borrowed. Questrade will charge interest until the borrowed funds are paid. Borrowed funds on margin can be paid back by either selling a stock or other asset, or by adding funds.
Non-registered vs Registered account
Registered accounts such as TFSA and RRSP have tax advantages, but is subject to rules such as contribution limit. On the other hand, profits inside a non-registered account are taxable and have no limits on the amount of deposits and withdrawals.
Can you turn margin off?
Questrade margin account can be used as a regular cash account when margin is not used. This will happen when the amount of cash is enough to purchase stocks. Access to margin will always be open on a Questrade margin account. To avoid margin interest, the amount of cash (USD and CAD) should not be negative.
The amount of margin used is how much negative the cash balance is. Questrade margin account can be used as a cash account as long as the cash balances remains positive. When the cash balance became negative, Questrade highlights it with a red font and a parenthesis.
A cash balance of ($1,000) means that you owe Questrade $1,000 and have to pay margin interest. For example, this can happen by purchasing $5,000 of a stock but only having $4,000 cash.
The cash and equity balances can be found on the Summary page or on the Trade section on the Questrade platform.
Uses of Questrade Margin Account
- Day/Active Trading
- Borrow Money to Trade
- Borrow Money while waiting for Deposits to clear
- No limit on deposits/withdrawals
- Lower interest rates than credit card
Questrade margin account is best for day and active trading since there is no limit on the number of trades, deposits, and withdrawals. Registered accounts such as TFSA and RRSP may have a limit.
Transferring funds from bank to an investing account may take 1-3 days. Using margin while waiting may help to buy stocks immediately and potentially take advantage of an opportunity on the market.
When borrowing money temporarily, using margin may have a lower interest cost than credit cards. Selling stocks or other investments can be avoided by using margin. However, this may result to a margin call if the value of stocks lose enough value.
Questrade Margin Interest
| CAD Margin accounts | 5.95% (CAD prime + 3.50%) |
| USD Margin accounts | 7.00% (USD prime + 3.75%) |
Interest rates are expressed on a per year basis. When borrowed money is paid back after a month, interest charges will only be for that month. Questrade charges interest every month.
For example, assume $10,000 is borrowed from Questrade since there is only $9,000 cash to purchase $19,000 of a stock. At 7% interest rate, the interest cost will be $700 per year.
If the borrowed $10,000 is paid back after 5 days, the total interest cost will be $9.59 ($10,000 X 7% X 5/365).
Margin interest will only apply when you have a negative cash balance. For example, $10,000 in cash and buying $12,000 worth of stocks will result to a negative cash balance of $2,000. Interest expense will be charged on the $2,000 margin used. At 7%, this will have a cost of $140 interest cost per year or $0.38356 interest per day.
Margin interest will stop when you either deposit cash or sell enough stocks or other assets to cover the negative cash balance.
Stock Investing Platforms in Canada
| Investing Platform | Commission Fees (Stock Buy or Sell Trade) |
| RBC Direct Investing | $9.95 per trade (Lower pricing of $6.95 for active traders, 150+ trades every 3 months) |
| TD Direct Investing | $9.99 per trade (Lower pricing of $7.00 for active traders, 150+ trades every 3 months) |
| Wealthsimple Trade | $0 free commission fees for CAD stocks 1.50% exchange rate fee for US stock trades |
| Questrade | Around $5 for most trades (Lower pricing available for active traders) |
Wealthsimple Tutorial – How to Trade Stocks
Questrade – How to Buy and Sell Stocks
Questrade
- Minimum of $1,000 to open an account
- $4.95 commission fees for every stock trade (buy or sell)
- 2% US dollar exchange rate fee
- Questrade is operating for more than 20 years. More than 200,000 new accounts every year
- Platform is a bit more complicated than Wealthsimple Trade
Visit questrade.com for more details. Get $50 in free trades rebate (up to 10 free trades) when you open a new Questrade TFSA account – Questrade.com (promo automatically applies)
Questrade – How to Buy and Sell Stocks
Margin Requirement
Every stock has different margin requirements. Volatile stocks such as Tesla may have a higher margin requirement compared to a relatively stable stock that has a low P/E ratio. A margin requirement of 40% means you have to pay at least 40% of the purchase and borrow the remaining 60%.
A cash balance of $4,000 can be used to purchase $10,000 of a stock that has a margin requirement of 40%. In this scenario, up to $6,000 can be borrowed from Questrade.
Margin Call
Margin call occurs when a stock lose enough value to make your equity below the margin requirement. When margin is not used and the amount of cash is enough to buy a stock, margin call will not happen since the account cannot go negative when margin is not used.
Overall, it maxing out margin requirements may not be ideal since a small drop on a stock may trigger a margin call. Instead of buying $10,000 of a stock (40% margin requirement) with only $4,000 cash, it may be better to purchase less than the maximum $10,000 to tolerate a possible drop on a stock.
To skip calculations, Questrade provides the amount of Maintenance Excess (Maint. excess) which is the amount before margin call. Maintenance excess will drop when either a stock or an asset drop in value, or by withdrawals.
Questrade Margin Power (How it Works)
Questrade margin power works by applying the Questrade TFSA account as a collateral to borrow more money on a margin account. Margin interest will only be triggered when margin is used. The buying power from a TFSA account will be added to the buying power on a margin account.
Qtrade Direct InvestingTM
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Qtrade Key Features
- Qtrade is Canada’s #1 online brokerage as ranked by The Globe and Mail (2022) and Surviscor (2021).
- $0 minimum required to get started.
- Low-cost trading: most investors’ commission rates start at $8.75 for online equity orders. Lower commission rates are available to Young Investors (30 years old or younger) and for clients who have larger portfolios or who trade more often.
- Option trades: $8.75 +$1.25 per contract
- Offers a commission-free ETF program: 100+ ETFs are free to buy and sell with no minimum.
Qtrade is the trusted online brokerage provider for over 100,000 clients across Canada and the trusted partner of many of Canada’s leading financial institutions. Qtrade has provided online brokerage services to Canadian investors since 2000 and is available in both English and French.
Questrade Margin Account Fees
Aside from margin interest which will only apply when cash balance go negative, Questrade charges fees per buy or sell trade.
In contrast, the big banks such as TD Direct Investing and RBC Direct Investing charges around $9.95 commission fee per buy or sell trade.
| Stocks (Buy or sell) | 1 cent per share (min $4.95, max $9.95) |
| Options (Buy or sell) | $9.95 + $1.00/contract |
| ETF Buy | Free |
| ETF Sell | 1 cent per share (min $4.95, max $9.95) |
| Mutual Fund | $9.95 per trade |
| International Stocks | 1% of trade value (min. $195) |
Note: Questrade will pass ECN fees to clients for stocks and ETF trades. ECN (Electronic Communication Networks) fees is around $0.01 for every 3 shares traded. For instance, buying 21 shares will result to an ECN fee of $0.07. In total, buying or selling 21 shares will cost around $5.02 ($4.95+$0.07).
ECN fees are charged by stock exchanges such as NYSE (New York Stock Exchange) and TSE (Toronto Stock Exchange). ECN fees apply for most trades. ECN fees varies from $0 to $0.004 per share. (More info)
For active traders, Questrade offers a monthly subscription of $89.95 a month for reduced pricing. Questrade offers a Fixed and Variable plan for active trader pricing.
| Fixed | Variable | |
| Stocks | $4.95 | $0.01/share (min. $0.01,max. $6.95) |
| Options | $4.95 + $0.75/contract | $6.95 + $0.75/contract |
| ETF Sell | Free | Free |
| ETF Sell | $4.95 | $0.01/share (min. $0.01,max. $6.95) |
Active trader pricing can be activated by going to Account Management >>> Market Data, and select either the Advanced U.S. streaming or Advanced Canadian streaming. This can be cancelled anytime.
Moving cash or investments between Questrade accounts
Cash or investments such as stocks can be moved from a margin account to a TFSA or other Questrade accounts. From the main menu, go to Requests >>> Transfer Investments. Select the amount of cash or the specific stock or ETF to transfer. Transfers typically complete within 2-7 days.
Transfer of stocks or cash to a TFSA account will count towards the contribution limit. Options cannot be transferred between accounts.
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