Margin Trading System In Forex Market.

By in Intro to Forex on February 22, 2021

Just 30 years ago for work at Forex in the beginning of trading you had to invest the sum completely covering the cost of the contract – more than one hundred thousand dollars. Now everything is much easier. Floating exchange rates have changed the concept of the foreign exchange market. Profit is based on currency fluctuations in any direction, making the market unsinkable. Enough large amount, of course, is necessary, but much smaller than previously. Though, the more you deposit, the greater the potential income may be. How does this happen? And how much money is needed for entry into the market?

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It is necessary only 2000 dollars and even less. These small initial sums give an opportunity to enter the market not only for average but for small investors. A dealing company makes it possible to possess the operation amount in 100 times larger, providing a credit line, otherwise known as “dealing leverage, or leverage”. You can operate the whole million, having put up only ten thousand.

Work with the use of support of dealing company is called “margin trading”. Margin trading has the official definition – “the execution of currency transactions in the amount of position in several times greater than the size of the security deposit.” The service is not free, but if you give back the money to the broker on the same day, the brokerage is not taken. The loan (leverage) is provided by the broker on the security of your funds. Extending the credit is automatic; the size depends on the broker.

Your goal is to select a dealing company, that is a broker who will carry out exchange operations on your behalf by giving the credit. You negotiate a contract with the dealing company. In this case, a prerequisite is bail – a certain amount is put up in the deposit. It is necessary for insuring the forfeit of funds of dealing company, as it carries out foreign exchange operations on your behalf, but at its own expense. The sum of collateral depends on the sum by which deals are made. Besides, the greater the sum of the pledge, the greater the value of leverage is.

Trading in the currency market is taken place only for a fixed amount – a lot. Besides the standard lot, there are mini lots. Mini lot is usually in 10 times smaller than a conventional lot. Thus, the margin of the transaction can be calculated according to the next formula: 1% of the market cost of the base currency is multiplied by the volume of transactions in lots. For instance, if the minimum amount by which the transaction takes place is equal to U.S. $ 100 000, while the value of the loan is 1:1 000, the minimum sum of security deposit will be equal to one thousand dollars, as it is calculated by the next formula: 100 000/100 = 1 000.

Today people are looking for additional or even primary sources of income as never. World economy is still in tough condition, and to find a well-paid job is not that easy task. And forex is one of the ways to earn some money. To trade successfully one has to be aware of events on the market, so live forex news is of great help here. Those who don’t know where to get fx news can take advantage of the web network. Just type “forex news trading“, for example, in Google or other search engine and you will get many news sources to choose from.

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