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An investor must first deposit money into the margin account before a trade can be placed. The amount that needs to be deposited depends on the margin percentage required by the broker. The amount of margin depends on the policies of the firm. In addition, some brokers require higher margin to hold positions over the weekends due to added liquidity risk.
When this occurs, the broker will usually instruct the investor to either deposit more money into the account or to close out the position to limit the risk to both parties. In situations where accounts have lost substantial sums in volatile markets , the brokerage may liquidate the account and then later inform the customer that their account was subject to a margin call.
Risk Management. Your Money. Personal Finance. Your Practice. Popular Courses. Key Takeaways Margin trading in forex involves placing a good faith deposit in order to open and maintain a position in one or more currencies. Margin means trading with leverage, which can increase risk and potential returns. The amount of margin is usually a percentage of the size of the forex positions and will vary by forex broker.
Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Articles. Stocks Introduction to Single Stock Futures. Margin in Forex market is the amount of capital that you are required to have in order to open and maintain a new position.
In most cases, the margin is a very small amount of capital. It can be regarded as a good faith deposit with a broker and is not a cost or a few. The amount of required margin varies broker by broker. Forex margin trading means trading with leverage , which is used to amplify the potential of your positions.
Margin is used very frequently in the Forex trading market. So what is the Forex trading margin explained? As for the remaining 99 percent, it will be provided by the broker. There are certain things that the margin depends on. First of all, it might be different according to the policies of the firm that you are trading with.
In addition, there are some brokers that require a higher margin to hold positions over the weekends because of the increased risks in the market. While the margin might be the same for many traders, there are other things that it depends on as well. The margin call basically is a demand of the broker that an investor deposit additional money into the account so that the margin can be of a minimum value.