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What is margin in Forex trading?
Margin in forex trading, one day on the day that currency trading flourishes online, we even hear about the currency trading project, but can this type of trading be seen as a real project through which a regular source of income can be provided? This is what we will learn about in this article and we will discuss the issue of margin in Forex.
A follower of this topic can well realize that this type of trade was indeed a significant source of income for large numbers of traders, as it was already a source of wealth for some others. But on the other side, trading in foreign currencies was the cause of great losses for a sizeable number of those who traded in the Forex markets.
Margin in trading is one of the most important terms used in the world of trading, which traders must get to know in detail. It provides many answers to traders about the nature of the Forex market. Also, he who mastered dealing with it can find his way step by step towards achieving the investment goals.
By knowing the margin in Forex we can identify some of the reasons that made online currency trading a source of income for many, while on the other hand was a reason for the losses of large numbers as well. In fact, knowledge is the most important – if not the only – factor in distinguishing between a successful trader and a failed trader.
Whoever has knowledge knows in detail how to profit from trading currencies and financial assets, but for those who do not start trading without possessing knowledge, the inevitable failure will be their fate. Money markets are not subject to personal whims and moods, but rather are a complete science, at the present time it is taught in private colleges and institutes.
What is margin in trading?We had known that companies offer traders what is known as financial leverage, and for the company to guarantee its right to reserve a portion of the investor’s balance, in which case the trader cannot enter into new deals except within the amount available to him after reserving a certain part of his balance by a company Mediation. Here it should be noted that the margin value available to open new deals decreases whenever open positions achieve losses, and increases if these deals achieve profits from Forex trading, petroleum trading, metal trading, and electronic trading.
For example: If a person has a balance of money in the trading account of $ 1,000 and wants to use a 10: 1 leverage to trade $ 10,000. In this case, as long as the trader used a leverage, the company reserves a portion of its balance, which is known as the reserved margin, and this margin differs in value from one company to another.
If the value of the margin to be booked in this case is $ 100, once the deal is opened the balance available to the trader for trading is $ 900, which is called the available margin. This balance gradually increases if the transaction begins to achieve profits and decreases if it achieves losses.
Full MarginFull margin or full margin means the use of leverage, in which all the original capital is reserved. In the sense that the trader will not have the ability to open new trades, because the available margin in this case will be zero, unless the transaction begins with profits, in which case the available margin begins to increase gradually as the profits increase as mentioned above.
Trading in full available margin or full margin is considered a form of tampering, no matter how experienced the trader has. The global financial markets are governed and influenced by many variables and circumstances, as they are of course not subject to any calculations, and this certainly means that complete certainty in the foreign exchange trading markets is impossible.
Therefore, we advise not to enter into deals of this type, whatever the temptations, if they are hit once, they will be mistaken again and again and the consequence of that strong remorse.
Margin CallWhen a trader uses financial leverage, and the deal begins to achieve losses, God forbid, the brokerage firms as we mentioned do not allow the losses to reach their money, so when the trader’s balance approaches the zero value due to the accumulated losses, the trading companies in the markets are sent Money Alert is called a margin call or margin call.
The primary purpose of Margin Call is to urge the trader to deposit additional money into the trading account to stop the loss bleeding and avoid losing all the capital.
In the end, the brokerage firm did not and will not interfere in the favor of the trader, and it will close the open deals and reset the account if the actual trader’s balance reaches close to zero and will not allow you to trade his money. Therefore, every time we emphasize that the most important things in the Forex and financial markets in general are proper capital management and proper risk management in a logical and rational way away from risk and greed.
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