Definition and Understanding Margin Trading

Definition and Understanding Margin Trading : Forex trading margin is very important and must be understood that all investors in the forex market. It can be considered that the margin of the blood (blood from the heart). In the stock market investment margin is determined by the stock broker or brokerage firm to investors. However, these loans are paid on time and bank credit.

New investors returns if they sold shares at a price higher than the purchase price. Or vice versa, it is possible to eliminate the position of sale (short sale) purchased at a price lower than the sale price. Always in exchange for the bodies of the futures brokerage firms, investors, interest on loans and fees.

The foreign exchange market, the scope is not easy to futures brokerage firms. This means that this is the future brokerage firm to'' save'' the needs of investors to invest their own resources. This is a different concept in forex trading or futures market does not normally require the presentation of (without shipping) property which, like stocks.

Market price of GBP1 = USD1.8850
Buy USD10, 000 (1 lot)
Value of transaction: USD 18.850 (USD10, 000xGBP1.8850)
Initial margin: 1%
Needed funding: $ 100 (1% xUSD10.000)

When the market price of GBP1 = USD1.89.50
Sell​​: USD10, 000 (1 lot)
Obtained results: USD18, 950 (USD18-USD18 0.950, 850)
Advantages: USD100 (0.950 USD18-USD18, 850)
Rate of return: 100% (USD100/USD100x100%)

 Here we see investors by buying 1 lot posotion GPB (USD10, 000), in which the price of GBP is open USD1.8850. Thus, the needed funds are USD18.850 or investor needs the funds as a capital transaction 1 lot GBP deposit.

Therefore, the system is done with the margin, and the margin set at 1% of the contract value, the investor put up enough capital USD100 (1% xUSD10, 000). Then, from funds USD9, 900? Since the futures trading there is no transfer would fund the deficiency.

So, to buy GBP worth of USD10, 000, the investor simply provide resources USD100. Currently in stock trading, stock trading to be worth USD100, 000, the investor is required to deposit margin USD50, 000 The lack of USD50, 000, are borrowed from the stock brokerage firm.

Fill Act No 32 of 1997 on the commodity futures trading, margin as the amount of cash or securities, the customers broker issued defined on futures brokers for futures clearing member or clearing member futures futures clearing house, ensure the implementation of the the futures contract. Margin deposited for each customer who places the message to the broker. It was intended as a performance bond futures contract was made in the framework of the mandate.

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