The overall sucess of the FOREX market is made possible today because of margin. Without this important principle, the average investor would not be able to participate in FOREX at all. So what is margin exactly?
1. Trading On A Margin
In order to trade on a margin, you must set up a margin account. With a relatively small deposit you can start trading large amounts of currency. Establishing a margin account with a FOREX broker enables you to borrow money from the broker to control currency lots that are usually worth $100,000. The amount of borrowing power your margin account gives you is the leverage. 100 – 1 means that with a single dollar you can control $100 worth of currency.
2. Increased Profits Also, Losses
As you might be able to extrapolate, you will be able to control $100,000 with just a $1,000 investment. Of course, you are borrowing money from the broker in order to do this, and any slip ups can end up costing you bigtime. The potential exists for the trader to lose more than his original deposit. Usually brokers will terminate a transaction that extends beyond the margin deposit.
3. The Benefits Of Margin...
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