Margin

Many novice investors are wondering what the Forex margin is. The concept of margin in the foreign exchange market is used in a slightly different meaning than in the economy as a whole. Margin is a trader’s deposit, a kind of pledge that he leaves the Forex company, taking part in a margin transaction.

The principle of exchange trading is that a trader, having insignificant capital, can use margin credit to open positions that are several orders of magnitude higher than his funds. The leverage (the ratio of the loan to the margin pledge) can be both 1:50 and 1: 500. This significantly increases the room for manoeuvre for the trader, allowing him to enter into transactions for large amounts.