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.
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Learning Forex (Preschool) - Margin Trading 101: Understand How Your Margin Account Works
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