Trading on Margin Trading allows you to buy and sell currency for no real exchange of one currency for another. All transactions are carried out under the full netting, or взамозачет, without the delivery of the underlying asset.
the Meaning of Margin Trading is the currency arbitration and removing the exchange rate difference.
Condition of Margin Trading is the placement of the customer in the Bank Deposit, or margin, which is seen as ensuring its arbitrage operations, and therefore, the trader can lose more than the value of the margin.
the Second feature of Margin Trading is to provide so-called leverage. Shoulder is a factor, the ratio between the maximum possible amount of base currency and the value of the margin.
if your trading account is $ 10000.00
the Shoulder is 100, or 1%. Shoulder in percentage is called the minimum margin.
the Maximum amount of base currency, the allowable in such a margin, will be:
10000 USD * 100 = USD 1 000 000. Or in other words, a trader should have 1% of the traded amount.
Work with the shoulder can greatly increase your profit potential.
the Amount of the margin of the client and the profit (or loss) is the variance margin. The ratio of the minimum margin to variation margin cannot exceed 100%, or unit.
due to its speculative direction, each operation in margin trading consists of two parts: the opening and closing of a position - full trade. Until the operation is closed opposite transaction, the broker entry exists about the open position. Currency market trading is fixed amounts of lots. You can buy 100 000 EUR (1 lot), 200 000 Euro (2 lots), but not 150 000 Euro. Currently, there are 2 types of lots: standard and mini. Mini lot, usually 10 times lower than the standard. Margin transaction (margin) = 1% of the market стоимоти base currency of instrument transaction volume in lots. I.e. for example for pairs EURUSD, EURJPY, EURGBP market the Euro 1,3357 and обеъме transaction of 1 lot margin will 1335,7$. Margin Call level warning (usually about 30%Stop Out Level - the closing loss-making transactions (usually around 20%) Consideration % Margin Call = (Equity / Margin) * 100% , where - Equity - current level of client tools - Margin - margin client Dictionary
the Idea of margin trading is that speculative interests on FOREX can be met without making real money supply, which reduces overhead costs incurred last, and gives the possibility of having a small account in USD open position for buying, and selling a large quantity of another currency. Thus, it is possible to carry out very fast operation, receiving a significant profit, as promotions, and with the fall in the exchange rates of currencies. Many speculative operations on international financial markets are held on the principles of margin trading).
Margin trading is trading with borrowed capital. Margin trading in the Forex market is lots. 1 lot approximately equal to us $100,000, but to open it, it must have from 0.5% to 4% of the sum.
the Participation of small and medium investors at Forex thanks to intermediary activities dealing companies. In many countries, average and small investors have access to the global currency market with the operations of the sum of $ US 2,000. The dealing company provides its clients with a line of credit or a so-called "dealing lever", several times exceeding the amount of the Deposit. For example, credit arm, exceeding the initial Deposit in the amount of 10 thousand dollars to 100 times, allows to operate with the sum of US $ 1 million. In other words, the equity investor is only 1-3% of the amount of conducted operations. The system works through our dealing (brokerage) company with the leverage received the name "margin trading" ("margin trading").
Margin Trading - operation to the amount of positions exceeding a certain number of times(20, 25, 30, 40, 50, 100 or 200) size of the insurance Deposit, which is accepted by the company as a consideration of its possible losses and operations in the order of the client. Or quite simply the essence of the "margin trading" is the following: the investor, placing mortgage capital, has the ability to control target credits allocated under this pledge and guarantee the Deposit possible losses on open currency positions.
the Client concludes the agreement with the company under which the latter undertakes on behalf of the client's own expense and in its own name to arbitrage operations. She has a risk of losses from such deals, so the customer as a Deposit puts on Deposit in the Bank a certain amount. The size of the Deposit is determined based on the amount of transactions made by the Bank and presented to the client by the leverage. For example, if the minimum amount of the transaction on purchase and sale of dollar contract amounts to 500 000 USD and provided to the investor leverage is 1:100, the minimum amount of collateral Deposit is 500 000 / 100 = 5 000. If the leverage is 1:50, the amount of collateral Deposit is 10 000 USD. If the dealing company receives a loss from operations undertaken by the investor has obligations before her in the rate of this loss which is covered by the security Deposit. If the company received the profit from the performed operation, it has obligations to the investor in the amount of this profit. The received profit is credited to the Deposit of the client. An obligatory condition is the customer's instruction to the company to close an open position, the company plays on their money. If this does not happen, the Bank may close a position, the client may suffer a loss. On the world market is extremely rare situation when the currency rates in relation to each other are changed by more than two percent, and lose their Deposit to the customer at a reasonable game is almost impossible. If the dealer of the Bank sees that the possible losses in case of unfavorable movement may exceed the security Deposit, he may close clients with a loss of position, not exceeding the Deposit amount.
Margin trading is attractive because of its accessibility. Investing in the securities of leading foreign countries with the purpose of obtaining fixed income is unlikely to be of interest to our compatriots. Of course, bonds of Federal exchequer of the USA the most reliable and stable, but their high cost, they provide a low profitability (around 6% annual) and are subject to long-term investments. Profitability on the stocks higher, but the amount of dividends directly depends on the success of a particular enterprise and preferences of its shareholders. More interesting is recognized purchase of shares for the purpose of playing on a rise, but it requires larger investments. Margin trading is devoid of the above restrictions. You can sell and buy depending on Your expectations, and the operation will be enough funds in the amount of only 1-3% of the transaction amount.
Margin (from the English. margin), common in the stock market and banking practice, the term for the amount of security under which the credit is provided.
Margin trading - trading with the use of borrowed funds issued by the dealing center or brokerage firm under a certain collateral (margin Deposit).