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What are Margin Requirements in Forex?

by Tem Tee NaijaStore.blogspot.com

Margin requirement is only applicable to margin trading. It allows you to hold a position much larger than your actual account value. Margin requirement or deposit is not a down payment on a purchase. Rather, the margin is a performance bond, or good faith deposit, to ensure against trading losses.Trading platforms often perform automatic pre-trade checks for margin availability and will execute the trade only if you have sufficient margin funds in your account.

Also Read..» Forex Basics | General Guidelines in Forex Trading..


In the event that funds in your account fall below margin requirement, most trading systems will automatically close one or more open positions. This prevents your account from ever falling below the available equity even in a highly volatile, fast moving market.


Also Read..» Controlling Your Forex Risk | Technical Analysis in Forex Trading..


For example, you may be required to have only $1,000 in your account in order to trade position that would normally require $20,000. The $1,000 (5%) is referred to as "margin". This amount is essentially collateral to cover any losses that you might incur. Margin should reflect some rational assessment of potential risk in a position. For example, if a market instrument is very volatile, a higher margin requirement would normally be justified.... 

 Also Read..» Orders and Positions in Forex Trading | Forex Trading Terminology..

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 


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About Tem Tee Tycoon I   NaijaStore.blogspot.com

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Joined APSense since, March 29th, 2008, From Lagos, Nigeria.

Created on Dec 31st 1969 18:00. Viewed 0 times.

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