What is the meaning of margin in Forex? Margin refers to the amount of money deposited by a forex trader to a broker set aside for trading activities. Margin means trading with leverage and it comes in percentages. It can come in the form of 1:100, 1:200, 1:300, 1:400, 1:500, 1:800 and some brokers are giving 1:3000 now 😄.
Use the tool below to calculate the margin required for you to open a trade with any broker:
Full Explanation On Margin, Margin Calls And Leverage
The amount of margin varies with Forex brokers. Most retail traders cannot afford the margin required to make a decent profit off the market so they often get a high margin from their brokers. This comes in the form of a loan from the broker to their various clients. The most popular margin usually allocated is $100,000.
What this means is that even if you deposit $5 Dollars you will be able to trade and still have the original value of 1pip with a 0.01 lot size. <Use Our Pip Calculator>
What Is Margin Call?
Margin call is an alert sent to you by the broker when your deposited fund is close to stopping out as a result of pending losses.The aim of the call is for you to replenish the account to avoid wiping the account.
What Is Leverage?
Leverage refers to the portion of money the broker is willing to loan you from the total of $100,000 margin available for your trading account. The higher the leverage, the higher the profit potentials as well as losses in case the market goes against you.
What Does The Leverage of 1:50, 1:100, 1:200, 1:300, 1:400, 1:500, 1:800, 1:1500 1:3000 Really Mean?
It means that for every $1 of your total deposit, the broker is willing to give you that portion of leverage from their total margin available. So in a nutshell, trading with a leverage of 1:100 means for every $1 of your Deposit, you get a $100 loan to trade. It limits the risk.
So if you deposit $100, using a leverage of 1:100, you will be given $100 x 100 which is $10,000. This means you will be trading as though you have a $10,000 trading balance. Same applies to all the other leverages. The lower the leverage, the lower the profits and risks and vice versa.