| The key to FOREX popularity is margin. Without margin, the FOREX would be beyond the reach of the average investor. So, what exactly is margin and how does it work?
Margin accounts allow FOREX traders to control large amounts of currency with a relatively small deposit. |
Establishing a margin account with a FOREX broker enables you to borrow money from the broker to control currency lots which are usually worth $100,000. The amount of borrowing power your margin account gives you is the leverage. Leverage is usually expressed as a ratio – a leverage of 100:1 means you can control assets worth 100 times your deposit.
What this means in FOREX is that with a 1% margin account you can control standard lots of $100,000 with a $1,000 deposit. Trading on margin increases both profits and losses, and the potential exists for the trader to lose more than his original deposit. With proper safeguards, however, loss can be limited, and usually brokers will terminate a transaction that extends beyond the margin deposit. Read more…
No comments:
Post a Comment