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’s rather a powerful tool. An average margined account will offer you a 1% margin, which means you only have to deposit 1% of the total value of your trades (together with your broker lending you the other 99%).
Lets say your account deals in lots of $100,000 each, so that you can buy a lot you now only need to invest $1000 of your own money in that trade (1%). Now this deal might seem like an amazing offer, also it does allow the ‘average joe’ to have a piece of the action without needing a couple of hundred thousand dollars to spare. However, there’s one big caveat you shouldn’t overlook:
Trading on a margin of 1% means a fall of 1% of one’s trade will put you out from the game!
Forex margin trading enables you to minimise your financial risk, however the flip side of the coin is that when the value of your trade dropped by the $1000 you submit it would be automatically closed out by the broker. That is called a ‘margin call’.
As you can see, a small movement in the incorrect 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 might make a good profit, but you would need to be absolutely certain in your prediction to make 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 you can gain an edge. This advantage may be the difference between success and failure.
Important: Gaining AN EDGE in Forex Margin Trading is key to Your Sucess!
Learn more about forex currency trading strategies [] and margins, and know the pitfalls the brokers try to hide!

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