What exactly is the Margin Balance and Max Deal size in Forex accounts? I have a practice account and when my max deal size was $0, it automatically closed all of my positions. Does this always happen? If so, how much of my balance would you recommend that I trade at once? Lets say I have $50,000 with 100:1 leverage.
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March 18th, 2008 at 4:08 am
Trading Forex has many advantages which are greatly appreciated by the Forex traders that have already mastered the markets and have improved their incomes and style of life. One of these great advantages of the Forex markets is the low margins needed in order to be able to place a trade. Something that is also very important for the new and inexperienced traders starting their careers.
http://tinyurl.com/2dqfk3
This “Margin” is the amount of money you need “to pay” the broker before you enter a trade, and the total amount of it will depend on the size of the trade you are willing to manage. The amount of the margin is calculated as a fixed percentage of this trade amount.
The good news for the Forex traders is that this percentage is usually only 1% of the trade amount and with mini-accounts it can be as low as 0.5% of the total trade. In other words this is what’s called Leverage; and in leverage terms this margin percentages are also viewed as a market having a 100:1 and up to 200:1 leverage. Which is a more than great leverage.
In other words, your broker will make you a loan, a pretty big loan, that you will use to trade and be able to obtain great profits without risking huge amounts of money. It can be seen as this: if you want to trade $100,000 USD, you will only need $1000 USD in order to control this amount of money and the broker will lend you the extra $90,000 USD. This is the power of leverage. More information can be found at: http://tinyurl.com/2dqfk3
But trading Forex wouldn’t be so great if this huge leverage could turn against you. As it usually happens if you want to trade Futures. When trading forex you can not have a debit balance, your broker will close your account as soon as your margin money runs out. You won’t have loans to repay. Giving you the peace of mind that in a bad trading day, you can at most lose all of your margin but you will never be left with a debit balance to your broker.
So, if you want to enter the great world of forex trading the margin you will need will be around $1000 USD or some more depending on how many trades you will enter. And you can even enter a trade with only $100 USD if you are starting your trading career with a single mini account.
http://tinyurl.com/2dqfk3