Forex Trading and Margin : Fx trading in Banks or online fx trading providers need collateral to ensure that the investor
can pay in the event of a loss.This collateral is called Margin ,it is the required equity that an
investor must deposit to collateralize a position .A margined account in fx trading is a
leverageable account in which fx trading can be purchased for a combination of cash or
collateral depending on what your broker will accept.
financial leverage"loan" in the margined account in fx trading is collateralized by the initial margin
"deposit" .This enables small traders in to hold a much larger position than their account
value .For example , you can take a lot of $100,000 for every $1000.
In fx trading
the minimum security " Margin " for each lot will vary from a broker to
another.So ,if the broker requires a one percent margin ,you'll need for every $100,000
traded a margin of $1000 as a security on the position.
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The margin in fx trading is required by the broker to ensure traders can pay in the event of
loss.You can make unlimited profit but you can't lose more than your margin.
For instance ,
If the value of the trade drops sufficiently ,the broker will ask you either to put in more cash
or sell a portion of your position or even close your position .
This
is a request in fx trading from the broker or dealer for additional funds or other
collateral to guarantee performance on a position that has moved against the client. If the
equity balance in the account falls below the margin requirement, a " Margin Call " will be
generated. In the event that an account exceeds its maximum allowable leveragein fx
trading, ALL open positions are liquidated immediately, regardless of the size or the nature
of positions held within the account.
Leverageable Margin
in fx trading enhances the rate of profit and in the same way enhances
the rate of loss.
