Margin Trading on Forex Market

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Margin Trading on Forex Market

The forex market gives a big expectation of profit but also contains big risks too. Forex trading on the forex market is increasingly popular when brokers offer trades with smaller capital. Of course to participate in the forex market (interbank market). This smaller capital offer is often called the forex market margin trade.

When an investor uses an account with a margin (less capital). So he basically borrowed capital (the rest) to the broker to increase the potential return on investment. Often, investors use margins when they want to invest in forex by utilizing loan money. Namely to control positions that are greater than the amount of money they invest.

You are interested in trading on the forex market first registering through a forex broker. Once you find the right broker, the margin must be set. The forex margin taken is the same as you taking a short-term loan from a broker. This loan is the same as the leverage value you choose. In other words, the margin setting is the same as the leverage setting of the account chosen at the opening of the trading account.

Financial management

Before starting trading, you must deposit money first in an account with a margin. The amount of money to be deposited depends on the percentage of margin agreed between you and the broker. For accounts that will trade 100,000 units or more (regular) currencies. The percentage of margin is usually 1% or 2%. So, for those of you who want to trade $ 100,000 with a margin of 1%, you have to deposit at least $ 1000 into your account. The remaining 99% is provided by brokers. There is no interest paid directly on the amount borrowed. But if you don’t close the position on the same day. This will be charged interest depending on your position and the short-term interest rates underlying the currency.

In accounts with margin, the broker uses $ 1,000 as collateral. If your position loses to close to $ 1,000, the broker can make margin calls. When this happens, the broker will usually instruct you to deposit again to maintain his position. Or close a position to limit risk for both parties.

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