The “dangerous” part of margin trading is taking a loan for more than you have equivalent cash collateral of.
That is margin trading though. It sounds like you thought only some trading on a loan counts as margin per definition but you knew you weren't trading with your actual money but a loan which is the important part.
margin trading overwhelmingly refers to paying a percentage as a collateral, not a stop-gap loan to cover ACH transfer delays. Yes you have to have a margin account to trade with immediately deposited funds (thanks ACH), but that's not the typical usage of the phrase and as such isn't what you'll find being described when you look up the term.
Particularly since you can trade with unsettled funds using a cash account in some circumstances, see situation #3 here: https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_ca...
It's one thing to loan me $100 when we have shaken hands and contractually already agreed that $100 is on its way. It's another thing to assume control of that $100 when the $100 already agreed to is on its way.
The contract with you says that if it settles, you get that money. The contract on the stock market says that it is supposed to settle. But a non-negligible percentage of the time, participants in the stock market do not make good on their contracts. Maybe they are a day late. Or the trade is reversed and the money or stock for your side comes back to you. You will get whatever happens while executing the trade, but it might not be what you expected to get.
In a cash account, the broker takes your money/stock and you live with the inconvenience. In a margin account, the broker is effectively lending you money to cover unsettled trades and is taking on that inconvenience instead. Given the high volume of trades going through a brokerage relative to the wealth of the brokerage, that inconvenience can become a real operational risk.
How real? Well, Robinhood just had to get an emergency loan for a billion dollars to cover trades that are open and have not settled. Why? Your ability to execute the trades that you made depends on various counterparties all doing what they said that they would, when they said that they would do it. But if they don't, and you prove unable, Robinhood is still legally obligated to make sure that they are able to settle all of their contracts on the stock market which they took on on your behalf.
that, heh, has been made apparent. Fortunately not at a loss to me.
To be honest, it's probable that I should adjust my risk tolerance to 5% ultra-low risk assets and 5% ultra-high risk; the current state of asset allocation is overly correlated with US large cap corporations.
What my perception was, was that you were being loaned money against the transfer you were sending in. It was not clear at all to me that it was a generic margin account. Because, among other things, I consider margin trading to be a higher risk activity than I care to engage in; if I had known that I was signing up for a margin account, I would have not signed up at all.
That said, I've definitely been edu-ma-cated on this, and I"ll be reading brokerage ToS more carefully from now on.