Forex Margin Trading As a Method of Leverage

A forex margin account is used by a trader when he wishes to get into a position which takes a much higher financial investment than whatever is currently obtainable in the account of the trader. This is one of the unique benefits of the forex trading market wherein the traders are able to conduct transactions in currencies of worth that is much higher than the amount available in the forex account. Unlike the stock market and the equity market that offer little or no leverage to the trader, the forex market offers a leverage of 100:1 to its trader, implying that when a trader who has $1000 in his forex account decides to trade with a forex margin of 1% he then would be in a position to trade up to $100,000.
Forex margin trading is usually carried out through the broker and to be able to indulge in this type of trade one needs to entail the services of a brokerage who offers margin trading as a part of a bigger package deal. This is owing to the truth that the concept of trading on forex margin is based on acquiring a brief term loan from the broker for the purpose of indulging in trade and in return paying him a certain percentage of profits. Therefore, one first needs to open a merchant account with the broker, deposit some finances in it and then use forex margin trading to get leverage and make a foray into the actual forex market.
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Although forex margin trading is considered to be an edge of forex currency trading, a word of caution here would be pertaining to the proverbial two sides of exactly the same coin. This implies a forex trader might well be familiar with the fact that if he is able to use the leverage option effectively, he stands to make phenomenal profits but simultaneously if his investments grow to be loss making then the extent of financial losses which may be incurred would also be manifold. This is evident from the truth that there are many individuals who complain of having lost out heavily because of forex trading and this is usually the case when people are misinformed concerning the market and make an educated use


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