Business, Investing, Making Money

FOREX Trading Using Margin

Forex Foreign Currency Coin Stacks

The overall success of the FOREX market is made possible because of the use of margin. Without it, the average investor would not be able to participate in FOREX at all. So what is margin exactly?

1. Margin

In order to trade on a margin, you must set up a margin account. With a relatively small deposit you can start trading large amounts of currency. Establishing a margin account with a FOREX broker enables you to borrow money from the broker to control currency lots that are usually worth $100,000. The amount of borrowing power your margin account gives you is the leverage. 100 – 1 means that with a single dollar you can control $100 worth of currency.

2. Increased Profits/Losses

As you might be able to extrapolate, you will be able to control $100,000 with just a $1,000 investment. Of course, you are borrowing money from the broker in order to do this, and any slip ups can end up costing you bigtime. The potential exists for the trader to lose more than his original deposit. Usually brokers will terminate a transaction that extends beyond the margin deposit.

3. The Benefits Of Margin Trading

With exponential buying power, your potential for more profits exists. FOREX currencies are traded in much smaller units than cash. The American dollar, for example, is traded in units down to 4 decimal places. Instead of $1.32 FOREX quotes are seen as $1.3256. The smallest unit in FOREX currencies is called the pip. Even a small change from 1.3256 to 1.3356 represents a difference of $100 dollars.

4. Losing More Than You Invest

You have to be extremely careful when working on a 1% margin account. A currency change in even a penny can lose your entire $1,000-dollar investment, but if the opposite is true you can stand to make $10,000 dollars from one penny.

5. Limiting Your Losses

To limit your losses, you can set up stop loss orders. Stop loss orders automatically close your position if the value of the currency hits/crosses a pre-determined price point.

“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” Robert Allen

Successful Forex Trading Practices –

Risk disclosure: *All investments involve risk. Before making any financial or investment decisions, we highly advise that you seek the advice of a properly licensed and trained investment professional.

Tagged , , , , , , , , , , , , , , , , ,

About mastersofmoney

Masters of Money, LLC., was founded by Michael "MJ The Terrible" Johnson, to create and sell how to information, to people looking for ways to make and save money. The goal of Masters of Money: Provide the tools, resources, and strategies, to help anyone who wants to be more successful, create the life of their dreams. Masters of Money's products and services list: Opt in email marketing - Online advertising - Social media marketing - Content creation - Content marketing - Internet marketing - Public relations campaigns - Web design - Direct response marketing - Copywriting - Company and / or product branding campaigns - Fundraising - Lead generation - Company and / or product launches - Business consulting - Partnering for profits campaigns - Blogging - Content library development - Content library maximization marketing - Multi-channel marketing creation and consultation - Ghostwriting - Ebook creation - Company continuity programs - Ezine creation - Ezine marketing - Digital newsletter creation - Digital newsletter marketing - Content trading - Information brokering - Company and / or product endorsements - Guest blogging - Business opportunity offers - Create and sell making and saving money strategies and information Company contact information: Foreign Corporation (LTD) AG. d/b/a Masters of Money, LLC. 3839 McKinney Avenue Suite 155-2281 Dallas, TX 75204 Phone #: (214) 744-3581 Fax #: (214) 599-9192 Email: Website: Blog:
View all posts by mastersofmoney →

Leave a Reply

Your email address will not be published. Required fields are marked *