The benefits of online forex trading with a margin are that it allows the broker to leverage lots of currency which are as much as 100:1 the size of his deposit. This makes for very good profit potential. However with every high profit venture, comes the high risk aspect which is the other side of the coin. If a trader is not careful and does not know what he is doing he could lose his margin deposit.
Your margin deposit on a currency lot of $100 000 at 100:1 is $1 000. No one wants to lose $1 000! This is the amount you need to open a margin account with a foreign currency broker. Traders (the depositor) have to know that if a currency moves in the wrong direction, even to the extent of 1cent, they could lose their deposit, and in the process the margin account.
One risk which is often overlooked is the fact that your broker may well simply close your transactions if it appears as though your losses are approaching the balance you have in your margin account. Even though you are aware of a down trend and are riding it out, while you expect a market reversal. You may well find that you have to replenish your margin account or your position will be closed. If this should happen, you will actually lose all the money in your margin.
While there are both risks and rewards when trading online in forex margin accounts, this is the case with any type of investment process if you hope to make big profits. Professionals are trading places with their jobs as doctors, accountants, lawyers and other enterprises, in the inherent belief that they can make far more money by online foreign exchange trading. They also need to take the necessary precautions to protect their investment.
So you see there are both risks and the potential for great rewards when using a margin account. The beauty of this kind of account however is that virtually anyone who can get their hands on $1 000 can become a forex trader. Professionals are making dramatic career changes to get into this industry, but everyone needs to know that knowledge is vital. Rather invest that first $1000 in getting yourself an education in currency trading, to obviate any costly mistakes.
Your margin deposit on a currency lot of $100 000 at 100:1 is $1 000. No one wants to lose $1 000! This is the amount you need to open a margin account with a foreign currency broker. Traders (the depositor) have to know that if a currency moves in the wrong direction, even to the extent of 1cent, they could lose their deposit, and in the process the margin account.
One risk which is often overlooked is the fact that your broker may well simply close your transactions if it appears as though your losses are approaching the balance you have in your margin account. Even though you are aware of a down trend and are riding it out, while you expect a market reversal. You may well find that you have to replenish your margin account or your position will be closed. If this should happen, you will actually lose all the money in your margin.
While there are both risks and rewards when trading online in forex margin accounts, this is the case with any type of investment process if you hope to make big profits. Professionals are trading places with their jobs as doctors, accountants, lawyers and other enterprises, in the inherent belief that they can make far more money by online foreign exchange trading. They also need to take the necessary precautions to protect their investment.
So you see there are both risks and the potential for great rewards when using a margin account. The beauty of this kind of account however is that virtually anyone who can get their hands on $1 000 can become a forex trader. Professionals are making dramatic career changes to get into this industry, but everyone needs to know that knowledge is vital. Rather invest that first $1000 in getting yourself an education in currency trading, to obviate any costly mistakes.
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