Forex Leverage and Margin Explained

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• is having the ability to control a large amount of money using none or very little of your own money and borrowing the rest.

• For example, to control a $100,000 position, your broker will set aside $1,000 from your account. Your leverage, which is expressed in ratios, is now 100:1. You’re now controlling $100,000 with $1,000.

• Margin is the amount of money needed as a “good faith deposit” to open a position with your broker.

• Margin is usually expressed as a percentage of the full amount of the position. For example, most forex brokers say they require 2%, 1%, .5% or .25% margin.

• In forex, to control a $100,000 position, your broker will set aside $1,000 from your account. Your leverage, which is expressed in ratios, is now 100:1. You’re now controlling $100,000 with $1,000. The $1,000 deposit is “margin” you had to give in order to use leverage.

• It is the amount of money your broker requires you to open a position. It is expressed in percentages.

• It’s the total amount of money you have in your trading account.

• he amount of money that your broker has “locked up” to keep your current positions open. While this money is still yours, you can’t touch it until your broker gives it back to you either when you manually close your current positions or when a position is automatically closed by your broker.

• This is the money in your account that is available to open new positions.

• You get this when the amount of money in your account cannot cover your possible loss. It happens when your equity falls below your used margin.

• If a margin call occurs, your broker will ask you to deposit more money in your account. If you don’t, some or all open positions will be closed by the broker at the market price.

• Based on the margin required by your broker, you can calculate the maximum leverage you can wield with your trading account.