One of the attractive features of forex online trading is the ability of traders to trade in forex with good margins. Margin trading is used to refer to the amount of leverage that traders have at their disposal to trade.
Compared to other trading vehiclesand exchanges, forex trading yields far higher margin. The stock market has a 1:1 margin, the ration for equity trading is to one, and the futures market has 15:1 while the ratio for forex trading can be as high as one hundred to one and even up to two hundred to one.
After you have undergone proper forex trading training you would need to deposit money with a forex trader to be able to trade. Most brokers have a minimum deposit size that you must meet, this amount is referred to as the initial margin. The broker will also indicate how much is required for each position or lot traded. For instance, you could trade a lot of $10 000 for every $100 you have.
Your broker will also let you know what is the minimum security margin that is required to trade each lot. The security margin needed could be a 1%margin. The result is that for the trader to trade the value of the lot $100,000 the broker will require $1,000 as a deposit on the position.
The high margins and leverage in forex trading allows traders to be able to trade far above the actual value of the amount they put into the trade. For example, a trader who is trading with $1,000 and with a leverage or margin of 100:1 will have the currency purchasing power of $100,000. Leverage thus helps the trader to dramatically increase ROI.
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