Keep reading for FREE
When trading forex, you are only required to put up a small amount of capital to open and maintain a new position.
This capital is known as the margin.
Margin can be thought of as a good faith deposit or collateral that’s needed to open a position and keep it open.
Margin is NOT a fee or a transaction cost.
Margin is simply a portion of your funds that your forex broker sets aside from your account balance to keep your trade open and to ensure that you can cover the potential loss of the trade.
This portion is “used” or “locked up” for the duration of the specific trade.
MORE IDEAS ON THIS
When trading, there are actually two different types of “profit or loss”, also known as “P/L”.
In order to start trading forex, you need to open an account with a retail forex broker or CFD provider.
Once your account is approved, then you can transfer funds into the account.
This new account should only be funded with “risk capital”, which is ...
In other words, for you to rea...
Each retail forex broker or CFD provider sets their own Margin Call Level and Stop Out Level.
Depending on the broker, a “Margin Call” can be one of two things:
Used Margin is the TOTAL amount of margin currently in use to maintain all open positions.
Said differently, it is the SUM of all Required Margin being used.
If you open more than one position at a time, each specific position will have its own Required Margin.
In forex trading, the Margin Call is when the Margin Level has reached a specific level or threshold.
When this threshold is reached, you are in danger of the POSSIBILITY of having some or all of your positions forcibly closed (or “liquidated“).
You use margin to create leverage.
Leverage allows you to trade positions LARGER than the amount of money in your trading account.
Leverage is the ratio between the amount of money you really have and the amount of money you can trade.
When a trader opens a position, they are re...
The biggest appeal that forex trading offers is the ability to trade on margin.
Margin trading gives you the ability to enter into positions larger than your account balance.
With a little bit of cash, you can open a much bigg...
If your account is “flat” or does NOT have any positions open, then your Balance and Equity are the SAME.
But if you do have open positions, this is when the Balance and Equity differ.
The Margin Level is the percentage (%) value based on the amount of Equity versus Used Margin.
Required Margin is the amount of money that is set aside & “locked up” when opening a position. It is also known as Deposit Margin, Entry Margin, or Initial Margin.
When trading with margin, the amount of margin (Required Margin) needed to hold open a position is calculated...
Here are five ways to avoid a margin call.
The Stop Out Level is when the Equity is lower than a specific percentage of your Used Margin.
This liquidation happens because the trading account can no longer support the open positions due to a lack of margin.
If this level is reached
Equity is your account balance plus the floating profit (or loss) of all your open positions.
Equity represents the “real-time” value of your account.
As your current trades rise or fall in value, so does your Equity.
Free Margin is the money that is NOT “locked up” due to an open position and can be used to open new positions.
When Free Margin is at zero or less, additional positions cannot be opened.
Free Margin can be thought of as two things:
Margin Calls and Stop Outs occur due to overleveraging. Using more leverage can increase your gains, but it can also increase losses, which will quickly deplete your Free Margin. The more leverage you use, the faster your losses can accumulate.
I want to make summary of what I have learned about Forex so that I can refresh it again.
More like this
‘Margin of safety’ is the difference between a stock price and its intrinsic worth, or value.
So if a stock is trading at $70 in the market, and you calculate the company’s intrinsic value as $100, you have a margin of safety of $30 (100 minus 70). In other terms, the sto...
A taxable event is a transaction or activity you're required to pay taxes on.
Explore the World’s
Take Your Ideas
Just press play and we take care of the words.
No Internet access? No problem. Within the mobile app, all your ideas are available, even when offline.
2 Million Stashers
Great interesting short snippets of informative articles. Highly recommended to anyone who loves information and lacks patience.
Don’t look further if you love learning new things. A refreshing concept that provides quick ideas for busy thought leaders.
Best app ever! You heard it right. This app has helped me get back on my quest to get things done while equipping myself with knowledge everyday.
This app is LOADED with RELEVANT, HELPFUL, AND EDUCATIONAL material. It is creatively intellectual, yet minimal enough to not overstimulate and create a learning block. I am exceptionally impressed with this app!
Great for quick bits of information and interesting ideas around whatever topics you are interested in. Visually, it looks great as well.
Brilliant. It feels fresh and encouraging. So many interesting pieces of information that are just enough to absorb and apply. So happy I found this.
I have only been using it for a few days now, but I have found answers to questions I had never consciously formulated, or to problems I face everyday at work or at home. I wish I had found this earlier, highly recommended!
Even five minutes a day will improve your thinking. I've come across new ideas and learnt to improve existing ways to become more motivated, confident and happier.
Read & Learn
Access to 200,000+ ideas
Access to the mobile app
Unlimited idea saving & library
Unlimited listening to ideas
Downloading & offline access
Supercharge your mind with one idea per day
Enter your email and spend 1 minute every day to learn something new.
I agree to receive email updates