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 idea of leverage in forex by trading on the margin, you will no doubt understand that it’s rather 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, to be able to buy a lot at this point you only need to invest $1000 of your own money in that trade (1%). Now this deal might seem like an amazing offer, and it does allow the ‘average joe’ to have a little bit of the action without needing a few hundred thousand dollars to spare. However, there’s 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, however the flip side of the coin is that when the value of one’s trade dropped by the $1000 you submit it would be automatically closed out by the broker. This is called a ‘margin call’.
As you can see, a small movement in the wrong direction could easily get rid of your trade, and see your $1000 gone in a few seconds. If the trade moved enough in the proper direction to cover the spread then you might make a good profit, nevertheless, you would need to be sure in your prediction to make such a risky trade.
Forex margin trading on a 1% margin is risky business, but by getting the balance right between your level of risk and how heavily leveraged you account is it is possible to gain an advantage. This advantage could be the difference between success and failure.
Important: Gaining An Advantage in Forex Margin Trading is Vital 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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