Forex trading involves risk. Losses can exceed deposits

Margin definition

Forex trading involves risk. Losses can exceed deposits

In trading, margin is the funds required to open and maintain a leveraged position.

Providers that offer margin trading will only ask for a portion of the full value of a position in order for that position to be opened. The amount of margin required will usually be given as a percentage of the full value of the trade.

Say, for instance, that you wanted to purchase $1000 worth of Royal Mail equities and your provider required 10% of the position to be put forward as a margin. The initial amount needed for the trade would be $100. This is known as the deposit margin.

If your trade begins to incur a loss, your deposit margin may no longer be enough to keep the position open. The margin needed to keep a position open is known as the maintenance margin. At this point, your provider will ask you to top up the funds in your account. This is a margin call.

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