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How Much Margin You Need In Forex Trading?
from: Adrian PabloTrading Forex has many advantages which are greatly appreciated
by the Forex traders that have already mastered the markets and
have improved their incomes and style of life. One of these
great advantages of the Forex markets is the low margins needed
in order to be able to place a trade. Something that is also
very important for the new and inexperienced traders starting
their careers.
This "Margin" is the amount of money you need "to pay" the
broker before you enter a trade, and the total amount of it will
depend on the size of the trade you are willing to manage. The
amount of the margin is calculated as a fixed percentage of this
trade amount.
The good news for the Forex traders is that this percentage is
usually only 1% of the trade amount and with mini-accounts it
can be as low as 0.5% of the total trade. In other words this is
what's called Leverage; and in leverage terms this margin
percentages are also viewed as a market having a 100:1 and up to
200:1 leverage. Which is a more than great leverage.
In other words, your broker will make you a loan, a pretty big
loan, that you will use to trade and be able to obtain great
profits without risking huge amounts of money. It can be seen as
this: if you want to trade $100,000 USD, you will only need
$1000 USD in order to control this amount of money and the
broker will lend you the extra $90,000 USD. This is the power of
leverage.
But trading Forex wouldn't be so great if this huge leverage
could turn against you. As it usually happens if you want to
trade Futures. When trading forex you can not have a debit
balance, your broker will close your account as soon as your
margin money runs out. You won't have loans to repay. Giving you
the peace of mind that in a bad trading day, you can at most
lose all of your margin but you will never be left with a debit
balance to your broker.
So, if you want to enter the great world of forex trading the
margin you will need will be around $1000 USD or some more
depending on how many trades you will enter. And you can even
enter a trade with only $100 USD if you are starting your
trading career with a single mini account.
As you can see, there are great reasons to consider trading the
forex markets.
About the author:
Adrian Pablo is a freelance writer with articles published in a
number of places. Get a free report on
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