Facts about forex margin that every traders should know
Trading Platform Software for backtesting & auto trading, for stock, futures and forex trading systems › Forums › Example Trading Systems › Facts about forex margin that every traders should know
July 31, 2017 at 3:17 pm #4842
So what is margin? You would have heard the term “margin” if you are in the forex market and if you are an experienced trader,of course, you would know what it means but if you are not you might wonder. In this article, we will help the novice traders to understand the term “margin” but as you may know in the world of forex you would definitely have something new to learn. So, even the professionaltraders might benefit from this article anyway, let us move to the context. So to explain the margin in the better way we will jot down an example below. If you have $100,000 positionsthe broker will keep aside $1,000 from the account and with leverage the amount will be expressed as 100:1. If you want to open a positionwith the broker then the margin will act as the collateral. The broker’s duty is to pool in every ones’ margins together and usesit as one so it will enable to place interbank network trades. Usually, the margin amount is depicted as the percentage of the total position. The topic ‘margin’ has lot to speak about but in today’s article we will describe the importantpoints. Read the article, to learn more about margins.
Terms related tomargin
There is much confusion related to the term “margin”among the naïve traders so we will try to explain the terms related to margin as well at least then the naïve traders will get a clear idea about the margins. The terms which are essential to be understood are such as margin required, account margin, used margin, usable margin, and margin call. So, these terms are must know by a naïve trader if he or she is playing a role in the forex market. Actually, the concept of forex margin is simple to understand but the traders have made it complicated. So here we will explain the essential terms in brief margin required means it’s the amount which your broker will get from the open position and it will be expressed as a percentage, account margin means it’s the total balance in the trading account of yours, used margin means the amount kept by the broker to have the present position open, usable margin means the amount you have in order to open other new position, and margin calls will take place when you face recoverable loss. So asnaïve traders you should have this basic idea in your head.
The margin level
The margin level means the percentage which is calculated based on the usable and used margins. The margin level is considered important because it will decide whether the traders can open new positions. The brokers will focus on margin levels thoroughly and the margin levels will vary according to the brokers.
Margin call in depth
We have already mentioned about the margin call but here we will discuss it in depth. The brokers will inform you when you are no more eligible to open any new positions because margin deposit has passed the minimum levelwhich you are allowed. Actually, a margin call is the worst fear of every forex trader.
You must be logged in to reply to this topic.