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New to Forex
What is Forex Trading?
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Margin*
The margin deposit is not a down payment on a purchase of equity, as many perceive margins to be in the stock markets. Rather, the margin is a performance bond, or good faith deposit. The margin requirement allows traders to hold a position much larger than the account value. FXCM's online trading platform has margin management capabilities, which allow for this high leverage. FXCM's default margin requirement is 1% for a 100K account.
In the event that funds in the account fall below margin requirements,
the FXCM Trading Desk may close some or all open positions. This prevents clients' accounts from falling into a negative balance since a client never pays a debit balance, even in a highly volatile, fast moving market.
*Leverage is a double-edged sword. Without proper risk management, this high degree of leverage can lead to large losses as well as gains.
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Since the trader opened 1 lot of the EUR/USD, his margin requirement or Used Margin
is $1000. Usable Margin is the funds available to open new positions or sustain trading losses. If the equity (the value of his account) falls below his Used Margin due to trading losses, his position may automatically be closed. |
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