Forex Margin Trading – The Dangers Of Trading On The Margin

Why is gaining too much leverage through forex margin trading a dangerous thing?
If you have already read about the concept of leverage in forex by trading on the margin, you’ll no doubt understand that it can be a powerful tool. A typical margined account will offer a 1% margin, therefore you simply deposit 1% of the total value of one’s trades (together with your broker lending you the other 99%).
Lets say your account deals in a large amount $100,000 each, so that you can buy a lot you now just need to invest $1000 of your profit that trade (1%). Now this deal may seem like an amazing offer, also it does permit the ‘average joe’ to have a piece of the action without needing a couple of hundred thousand dollars to spare. However, there is one big caveat you mustn’t overlook:
Trading on a margin of 1% means a fall of 1% of your trade will put you from the game!
Forex margin trading lets you minimise your financial risk, but the flip side of the coin is that when the value of your trade dropped by the $1000 you put forward it might be automatically closed out by the broker. That is called a ‘margin call’.
As you can see, a little movement in the wrong direction could easily wipe out your trade, and see your $1000 gone in a few seconds. If the trade moved enough in the right direction to cover the spread then you could make a good profit, nevertheless, you would need to be sure in your prediction to create such a risky trade.
Forex margin trading on a 1% margin is risky business, but by obtaining the balance right between your degree of risk and how heavily leveraged you account is it is possible to gain an advantage. This advantage may be the difference between success and failure.
Important: Gaining An Advantage in Forex Margin Trading is key to Your Sucess!
Learn more about forex trading strategies [] and margins, and know the pitfalls the brokers make an effort to hide!

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