What is margin trading ?

jimcarter

Trader
Nov 10, 2017
36
6
24
38
USA
Margin trading is a type of trading where you trade with borrowed money, using your own money as collateral. This can be risky, but if done correctly, it can lead to large profits. You need to have an account with a broker that offers margin trading to margin trade. You will also need to deposit some of your money into the account as collateral.

You are essentially borrowing money from the broker to trade when you margin trade. The amount of money you can borrow will depend on the broker and your account size. This borrowed money is known as the 'margin.' The money you deposit into the account as collateral is known as the 'initial margin.'

The initial margin is important because it protects the broker in case you lose money on your trades. If the value of your account falls below the initial margin, the broker can close out your positions and take the losses themselves. This is why it is important only to borrow as much as you can afford to lose.

Margin trading can be a great way to increase your profits, but it can also be risky. Before you begin trading, be sure you are aware of all the risks.
 

alzheimer

Banned
Apr 7, 2022
29
6
4
32
Margin trading involves using leverage, basically thanks to very high liquidity in FX market you may open a position larger than your equity and the latter will serve as collateral in case of a loss. Though there is margin call and stop out levels, means a loss on your trade won't drain your equity entirely, in the worst case position will be liquidated when the loss amounts to 70% of your equity (so stop out level is 30%)
 

alzheimer

Banned
Apr 7, 2022
29
6
4
32
Margin means you can open position larger than your capital using leverage and due to high liquidity of equity and fx markets your position can be closed when PNL approaches stop out level for your equity.