Forex Margin Trading – The Dangers Of Trading On The Margin

Why is gaining an excessive amount of 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 will no doubt understand that it’s rather a powerful tool. A typical margined account will offer a 1% margin, therefore you only have to deposit 1% of the full total value of your trades (together with your broker lending you the other 99%).
Lets say your account deals in a large amount $100,000 each, as a way to buy a lot you now only need to invest $1000 of your own money in that trade (1%). Now this deal may seem like an amazing offer, and it does permit the ‘average joe’ to obtain a piece 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 one’s trade will put you out from the game!
Forex margin trading lets you minimise your financial risk, but the flip side of the coin is that when the value of your trade dropped by the $1000 you put forward it will be automatically closed out by the broker. This 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 couple of 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 sure in your prediction to create 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 you can gain an advantage. This advantage may be the difference between success and failure.
Important: Gaining An Advantage in Forex Margin Trading is Vital to Your Sucess!

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Learn more about forex trading strategies [http://forexmentalist.com/forextrading/forex-trading-strategies-leveraged-trading/] and margins, and know the pitfalls the brokers make an effort to hide!

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