Margin Trading

Margin trading in the forex market is not as complicated as some may make it out to be, an easy way to view it is like this:
When a trader trades on a margin he/she is using a free short-term credit allowance from the institution offering this margin. The purchaser is allowed an amount of currency on short-term credit that vastly exceeds the account value of the trader.

This is an example:

Trader x has an account with EUR 50'000 with ADVANCED-FOREX. He trades ticket sizes of 1'000'000 EUR/USD. This equates to a margin ratio of 5% (50'000 is 5% of 1'000'000). How can trader x trade 20 times the amount of money he has at his disposal? The answer is that ADVANCED-FOREX temporarily gives him the necessary credit to make the transaction he is interested in making. Without margin, trader x would only be able to buy or sell tickets of 50'000 at a time. On standard accounts ADVANCED-FOREX applies a minimum 1% margin. By trading with ADVANCED-FOREX, trader x has the capacity to make transactions up to 5'000'000 EUR at a time.

The margin will serve as collateral to cover any losses that might be incurred. Since nothing is actually being purchased or sold for delivery, the only requirement for having funds in your account, is to allow a sufficient margin.

ADVANCED-FOREX'S margin capacity reflects our willingness to provide the trader with the level of risk he wishes to adopt. ADVANCED-FOREX does NOT recommend trading with a full 1% margin capacity as this engages a high degree of risk. The choice is ultimately left to the individual trader to make transactions that meet his appetite for the risk involved.

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