Forex Margin Trading As a Method of Leverage

A forex margin account is used by a forex trader when he wishes to invest into a position which requires a much higher financial investment than that which is currently available in the account of the trader. This is one of the unique advantages of the forex trading market wherein the traders can easily conduct transactions in currencies of worth that is much higher compared to the amount available in the forex account. Unlike the stock market and the equity market which offer little or no leverage to the trader, forex supplies a leverage of 100:1 to its trader, implying that if a trader who has $1000 in his forex account decides to trade with a forex margin of 1% he then would be in a position to trade around $100,000.
Forex margin trading is usually carried out through the broker and in order to indulge in this form of trade one needs to entail the services of a brokerage who offers margin trading as a part of a bigger package deal. This is owing to the point that the idea of trading on forex margin is based on acquiring a short term loan from the broker for the purpose of indulging in trade and in return paying him a particular percentage of profits. Therefore, one first needs to open a merchant account with the broker, deposit some finances in it and then use forex margin trading to get leverage and create a foray into the actual forex market.

Although forex margin trading is considered to be an advantage of forex currency trading, a word of caution here will be pertaining to the proverbial two sides of exactly the same coin. This implies that a forex trader might well be aware of the fact that if he is able to utilize the leverage option effectively, he stands to make phenomenal profits but as well if his investments turn out to be loss making then your extent of financial losses which may be incurred would also be manifold. This is evident from the truth that there are many people who complain of experiencing lost out heavily because of forex trading and this is usually the case when people are misinformed about the market and make an informed use

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