Virtually anyone, even those who never engaged in stock trading, may have encountered such a thing as a margin.But while not everyone was wondering: "What is the margin?" This word, the same transforms from English ("Margin") and French ("Marge") language and designates the edge or margin of the page, introduced a special term has been widely used ininsurance and banking, as well as trade (including exchange).
In its classic sense margin is the difference between the price of the product (its cost) and the cost of buying or selling.In other words - it is nothing like profit received by traders due to the difference of the purchase price, or sell any material assets or securities, including currencies.Depending on the application, the margin can be credit, bank guaranteed or supported.To assess the profitability of enterprises' turnover from the economic point of view, there is such a thing as a commercial margin, which is usually expressed as a percentage.
slightly different meaning given to the term in the Forex market.Those who are interested in trading on the difference in rates, probably more than once met with this concept.So, what is the margin trading?In this case, the deposit or, more precisely, the deposit required for opening a position in the foreign exchange market.Or, in other words, part of the funds in the account of the trader, used as a security deposit.For the currency trader is not only important to know what margin, but also to know how to calculate.The size of the margin depends on the size of the lot and leverage.For direct quotations must be divided by the value of the lot of leverage.For example, if you have the leverage of 1: 200 and trading lot is 10,000 USD, the margin will be equal to 10000/200 = 200 USD.If the client account is $ 1,000, then at the disposal of the trader has $ 800 and $ 200 are frozen, as collateral to cover losses if the deal went in the wrong direction, which he had hoped.That's what the margin in the Forex market.
Margin trading is attractive for dealing centers offering this service, and for the investors themselves, because it allows you to open positions in an amount several times greater than the size of the deposit.For example, on account of having only $ 100 with leverage 1:50, it is already possible to trade volume of $ 5000.Here it should be noted that too much leverage, not only greatly improves the ability to purchase, but is also associated with increased risk and can literally destroy your account as when trading with great leverage increases not only profits, but also losses.To avoid this, in the case of lack of funds to maintain current open positions the trader receives a "margin call" (margin call) - a sort of notice of the need for additional funds for the preservation of the open position, otherwise it is forced to its closure - triggered the so-called "stop out "(stop out).
only correct understanding of what leverage is and what the margin, can improve the profitability of trading at the lowest possible risk.
