The Bull

Saturday 19

August, 201712:23 AM



Margin

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What does it mean?

Margin is the deposit needed to trade forex. It's the amount of money that you put up, and not the amount of money that you borrow. Say, you have $100 in your account and your leverage is 100:1. This means that you can trade up to $100,000 worth of currencies.

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TheBull says...

In forex, the margin is the miminum amount - or deposit - required to place a trade. Think of margin and deposit as interchangeable terms.

Many brokers offer leverage of 100 to one, which means that your $1,000 deposit can get you as much as $100,000 in currency. Or, putting it another way, if you want to purchase $100,000 of USD/EUR at 100:1 leverage, you’ll need to cough up the 1 per cent margin, or $1,000.

Should the currency pair move in your favour by 1 per cent, your gain is catapulted to 100 per cent - a $1,000 profit suddenly becomes a $2,000 profit. Of course, a move in the other direction means your initial $1,000 deposit is completely wiped out.

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