Everytime a trader takes leverage, which is buy/sell for more than how much money he has, there is a risk he takes with an expectation of a higher return. Margin funding for example is when you buy 1lk worth of stocks, when you have only 30k, and borrowing the remaining 70k from the broker.
So firstly the risk with with margin funding is the risk of losing signficant amount of capital because of leverage.
Margin funding usually comes with an interest component on the money that is borrowed, and hence if the stock doesn’t move in your direction by a certain amount, the chances of loss increases.
If the stock moves significantly against you, there would be a margin call from the broker,asking you to bring in more money, and if you are not able to bring in the broker squares off the position.
Above are some of the risks,