What is a Margin in Forex Trading
In this article, you will learn what margin is and how you can get a free margin in Forex on FBS.
Any trader uses borrowed funds in one way or another to increase the potential profit. Investors often use margin accounts when they want to invest in stocks or currencies using borrowed money. Money in this case is borrowed from a broker in order to control large positions starting with a minimum capital.
If simpler put, Forex margin is the money that must be on the account of a trader in order to open a Forex deal. At the same time, when trading, this privilege is not paid separately, you pay the broker only its standard percentage.
There are several types of margin:
1. Negative margin – sad situation for a trader. The margin is so small that it is impossible to cover ongoing losses from Forex trading with leverage.
2. Free margin – this is the amount on the Forex trading balance used to open new positions.
Margin trading allows a trader to increase the initial position size. But it is worth remembering that it also works against you – not only profits are higher, but also losses. If the price goes the wrong way, the Forex account can become empty in no time.
How leverage and margin are related
Leverage and margin are included in Forex trading. Margin, as already mentioned, is the minimum amount to place a trade. And leverage is a tool that allows a trader to open large lots, which at a cost of 1:1 would be beyond his means. Leverage is essentially a free loan from a broker. It happens from 1:1 to 1:3000. Since positions in Forex are often quite expensive, not everyone has the opportunity to open them.
How does it work? Let’s explain with a simple example. Opening one position, for example, costs $100,000. You can open it using your money, and this is where the deal ends. Or you can use a leverage of 1:1000 and you only need 100$ instead of 100,000$ to open a position, that is 1% of the amount. The most popular and common leverage in Forex trading is 1:100.
Why choose FBS
A lot depends on the choice of a broker. First of all, a good broker will directly affect your trading. Also, the choice of a broker directly depends, for example, on the leverage available to you, the percentage that the broker takes from transactions, and so on.
A separate advantage will also be open and official cooperation with some companies, organizations or teams. Did you know that FBS officially cooperates with Leicester FC and Barcelona FC?
The advantages of FBS also include a separate news feed with up-to-date news that will help you adjust your trading operations. If you have enough experience and skills, reading such news regularly will save you from losses.
What to do if your skills or experience are not good enough? In this case, FBS has a tutorial section that will take you by the hand from the basic to the most complex and difficult concepts. This will allow you to get the necessary minimum knowledge in order to start trading. But do not forget to regularly receive new knowledge from other sources, in trading this is extremely important.
The disadvantages of FBS include a slightly overburdened interface of the site, especially its mobile version. But this is rather a subjective disadvantage, someone may like it. The choice, as always, is yours, and you should be careful when choosing the right broker.
