AUD/USD
Australian Dollar has reached all the targets of “failure swing” reversal pattern. Currently we should expect the price to keep moving downwards to the level of 1.0510. One can consider selling the pair at current levels with the stop above 1.0645.
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Friday, May 13, 2011
Forecast for May 13th, 2011
USD/CAD
Canadian Dollar is forming the right “shoulder” of “head & shoulders” reversal pattern. One can consider buying the USD/CAD currency pair with the tight stop below 0.9615 near the level of 0.9640. After the price breaks the neckline, we can increase the amount of long positions.
Canadian Dollar is forming the right “shoulder” of “head & shoulders” reversal pattern. One can consider buying the USD/CAD currency pair with the tight stop below 0.9615 near the level of 0.9640. After the price breaks the neckline, we can increase the amount of long positions.
Forecast for May 13th, 2011
USD/CHF
Franc is moving inside the rising channel. We should expect the pair to keep growing to the level of 0.8960 and can consider buying it with the tight stop. If the price breaks the channel’s lower border and leaves it, this case scenario will be cancelled.
Franc is moving inside the rising channel. We should expect the pair to keep growing to the level of 0.8960 and can consider buying it with the tight stop. If the price breaks the channel’s lower border and leaves it, this case scenario will be cancelled.
Forecast for May 13th, 2011
EUR/USD
All currency pairs are moving according to the forecast. At the moment one can consider selling the EUR/USD currency pair with the target in the area of 1.3750. The stop must be above 1.4240. If the price breaks the channel’s upper border, this case scenario will be cancelled.
All currency pairs are moving according to the forecast. At the moment one can consider selling the EUR/USD currency pair with the target in the area of 1.3750. The stop must be above 1.4240. If the price breaks the channel’s upper border, this case scenario will be cancelled.
Sunday, May 1, 2011
Forex Technical Analysis 2011/02/05 (EUR/USD, USD/CHF, AUD/USD) Forecast FX
EUR/USD
The EUR/USD currency pair keeps moving inside the rising pattern with the final target in the area of 1.5050. Currently we should expect the price to grow to the level of 1.4920, which may be a starting point of the correction to the 5th point of reference in the area of 1.4600. One can try to buy Euro during a long term period near the channel’s lower border. But if the price breaks the channel’s lower border, this case scenario will be cancelled.
USD/CHF
Franc is moving inside the descending channel, the target of the fall is the area of 0.8571. One can try the tight stop sales. If the price breaks the channel’s upper border, this case scenario will be cancelled.
AUD/USD
Australian Dollar keeps moving upwards, the target of the growth is still the area of 1.1046. By the moment the AUD/USD currency pair has broken the symmetrical triangle upwards. One can try to buy the pair with the tight stop. If the price breaks the channel’s lower border, this case scenario will be cancelled.
The EUR/USD currency pair keeps moving inside the rising pattern with the final target in the area of 1.5050. Currently we should expect the price to grow to the level of 1.4920, which may be a starting point of the correction to the 5th point of reference in the area of 1.4600. One can try to buy Euro during a long term period near the channel’s lower border. But if the price breaks the channel’s lower border, this case scenario will be cancelled.
USD/CHF
Franc is moving inside the descending channel, the target of the fall is the area of 0.8571. One can try the tight stop sales. If the price breaks the channel’s upper border, this case scenario will be cancelled.
AUD/USD
Australian Dollar keeps moving upwards, the target of the growth is still the area of 1.1046. By the moment the AUD/USD currency pair has broken the symmetrical triangle upwards. One can try to buy the pair with the tight stop. If the price breaks the channel’s lower border, this case scenario will be cancelled.
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Forex Margin Trading As a Method of Leverage
A forex margin account is used by a forex trader when he wishes to invest into a position which requires a much higher financial investment than that which is currently available in the account of the trader. This is one of the unique advantages of the forex trade market wherein the traders are able to conduct transactions in currencies of worth which is much higher than the amount available in the forex account. Unlike the stock market and the equity market which offer little or no leverage to the trader, the forex market offers a leverage of 100:1 to its trader, implying that if a trader who has 1000 in his forex account decides to trade with a forex margin of 1% then he would be in a position to trade up to 100,000.
Forex margin trading is usually carried out through the broker and in order to indulge in this form of trade one needs to entail the services of a forex broker who offers margin trading as a part of a bigger package deal. This is owing to the fact that the concept of trading on forex margin is based on acquiring a short term loan from the broker for the purpose of indulging in trade and in return paying him a certain percentage of profits. Therefore, one first needs to open an account with the broker, deposit a certain amount of finances in it and then use forex margin trading to gain leverage and make a foray into the actual forex market.
Although forex margin trading is considered to be an advantage of forex trading, a word of caution here would be pertaining to the proverbial two sides of the same coin. This implies that a forex trader might well be aware of the fact that if he can use the leverage option effectively, he stands to make phenomenal profits but at the same time if his investments turn out to be loss making then the extent of financial losses which would be incurred would also be manifold. This is evident from the fact that there are many people who complain of having lost out heavily due to forex trading and this is usually the case when people are misinformed about the market and make an educated use of the forex margin option.
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Understand the Importance of the Forex Margin Before You Trade Forex
Forex margin denotes the amount of money in your trading account that is available for you to trade. This amount basically depends upon the amount of equity in your account. From the total amount of equity in your account if you subtract the amount of margin already used, the balance represents margin amount available for use to trade forex.
Standard accounts, mini accounts and micro accounts are the three types of forex accounts that traders normally use. Micro accounts allow forex traders to trade in the smallest of lot sizes that generally is 1000 units of the base currency. In the mini account, trades can be undertaken in lot sizes of 10,000 units of the base currency. In the standard forex account, trades happen in 100,000 units of the base currency. Standard account is most the popular account used by professional forex traders.
At any point of time if the equity in your account falls below the amount of forex margin used, then your broker will initiate a margin call. The call is made to recover the drop in your equity value. To give an example, if you have 20,000 in your account, your usable margin will be 20,000.00. If you buy lots worth 14,000, the remaining usable margin will be 6000 in your forex account. In case the value of your investments falls by a few pips causing the equity value to drop down from 20000 to 14000, your broker will trigger a margin call. Effectively this will result in you losing 6000 of your investment capital.
Forex market is ever changing with frequent currency price fluctuations. Margins can get eroded in no time unless you trade cautiously. One of the key aspects of forex trading therefore is to manage your forex margin effectively. Skilled technical analysis and money management strategies will help you minimize your losses to a very large extent. In addition abstain from committing mistakes like overtrading which can at times erode your entire margin amount. Also keep a close track of your trading account balance. Unless you are aware of when your account runs into margin call, you will have no idea on when to cut your losses.
Forex market trading is no longer the domain of large institutions alone. Ordinary people like you and me can easily learn the basics of forex trading education and start trading profitably in the market.
--------------------------------------------------------------
Forex Hedging and Forex Margin
Forex trading has risen significantly in popularity over the past ten to twelve years or so and many new Forex traders are eager to learn some of the more creative ways different traders are making a profit. Two of the most prevalent techniques that have allowed currency traders to leverage their investments even more are Forex hedging, and trading on what is called a Forex margin.
Both of these methods can by used in synchronous fashion although each can be used separately without the other and this will depend heavily on the individual trader's own preferences. Using Forex hedging and a Forex margin can greatly increase your overall power with Forex, and using these methods can give you the edge to become a profitable trader over time.
So what is Forex hedging and Forex margin? Forex margin is essentially when a particular Forex trader is taking advantage of a short-term credit from a particular organization that may be offering such a credit. This credit is in actuality the margin the trader will use to make trades and it can allow the trader to leverage his investment at sometimes at around twenty times his initial investment. This can give a Forex trader more leverage than they ever could have with just their initial investment, and this is how much of the independent Forex traders around the world utilize their capital with Forex.
Forex hedging is an entirely different thing than trading on a Forex margin although the two are often used together by many of the best Forex traders. Forex hedging is essentially a technique used by many Forex investors to try and offset some of their risk by taking opposing positions in terms of currency pairs and trades. Having varying positions is supposed to give the trader a shield against certain losses and this can give the trader a greater amount of control over time if it is done correctly.
Forex hedging has come under scrutiny lately with the CFTC approving a new compliance rule that will make the implementation of such hedging techniques a bit more difficult. Regardless, traders will always find a way to use hedging in Forex and often times they will use their Forex margin in accordance with their hedged positions so that they can gain better spread across the entire market. In the end it is up to you if you utilize each separately or both together at the same time, but just remember that both can make you a lot of money if done correctly.
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Sistema Forex - Margin Trading In The Forex
Now you might be wondering how it is possible to earn big money trading the Forex? The answer is Margin trading. In other words you trade with borrowed money.
Forex is always traded in Lots, so in actual fact you cannot purchase just 100 Euros, (or in fact 100 units of any
currency). A standard Lot is 100,000, some brokers offer Mini-Lots of 10,000, and a few brokers also offer Micro-Lots of 1,000. The good news is you don't need anything like 100,000 to open a Forex account or to trade the Forex.
The Forex market uses a system called Margin trading, where you pay the broker a security margin, usually between 0.25 and 5 percent. The security margin gives you control over a very much larger unit (or lot) of currency. For example, to trade a standard lot 100,000, your broker will probably require a margin (deposit) of 1 percent = 1,000. (In actual fact you will need more than 1,000 in your account, in case the market moves against you.
Suppose you sell 100,000 and buy Euros at 10:00 AM. The Euros will cost 1.4725 each. So you will receive (rounded) 67912 EUR. Your 67912 EUR will have a value of 67912 x 1.4720 = 99,967 (Note: You have lost 33 instantly because of the bid/ask spread.) Now, suppose you sell your Euros at 5 PM and close the trade. You sell your 67912 EUR and buy U.S. dollars. You receive 1.4770 for each Euro = 67912 x 1.4770 = 100,306. So you make an overall profit of 306 on the days trading.
Margin trading is an example of leverage (sometimes called gearing), where you are using a relatively small amount of money to control (or lever) a very much larger amount of money. This enables you to profit (or lose) from very small changes in Forex quotes.
If you trade with 1,000, you will need more than 1,000 in your account. In the example above, if you only had 1,000 in your account to start, you would have a negative amount (-33) in your account immediately after your trade was opened.
Now, suppose you started with 2,000 in your account:
You sell U.S.100,000 and buy Euros at 10:00 AM. Your used margin is now 1,033, so the usable margin in your account is 2,000 - 1,033 = 967. Imagine the trade moves against you, so that at 12:14 PM the Forex quote: EUR/USD = 1.4578/1.4583. Your 67912 EUR are now worth 67912 x 1.4578 = 99,002, and the usable margin in your account = 2,000 - 1,998 = 2. This would result in a margin call, and your trade would be closed to prevent your account going negative, so you would lose 1,998.
If however, you had 3,000 in your account, your trade could have continued:
If the trade had continued moving against you so that at 1:00 PM the Forex quote: EUR/USD = 1.4570/1.4575. Your 67912 EUR are now worth 67912 x 1.4570 = 98,948. Your used margin is now 2,052 but you still have 3,000 - 2,052 = 948 in your account, so you can continue trading. If the Euro then recovers, so that at 5:00 PM the Forex quote: EUR/USD = 1.4770/1.4775, you sell your 67912 EUR at 1.4770 each and make an overall profit of 306.
Always aim to have at least twice your margin in your account at all times (even when a trade moves against you). However, it is safer still if you never trade with more than 10 percent of your account at any time.
Margin Percent = 100/Leverage
Leverage = 100/Margin Percent
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A Forex Margin Call - What is it and Can a Margin Call Hurt Me?
A Forex Margin call happens when a client's account equity falls below the required margin.
Leverage financed with credit, which is a description of what a margin account entails. This is very common in Forex. A margined account is a leverageable account in which Forex currencies can be purchased for a combination of cash or collateral. Various brokers accept different limits.
Investing on margin isn't the same as gambling. There are some similarities between margin trading and the casino. Margin is a high-risk strategy that can yield a huge profit if handled correctly. The dark side of margin is that you can lose your shirt and many other assets you own. Investing on margin without understanding what you're doing is very risky.
As with any other investment research is the key to not losing your shirt! If, for instance, a client has 10 lots of open positions a margin call will occur if account equity drops below 5,000. At this point, some or all of the client's open positions will be closed immediately at current prices.
Traders are also able to monitor both usable margin and used margin from the "Account Information" window of his/her online trading platform. Positions will be automatically closed once usable margin drops below zero.
Traders may avoid margin calls by either using stop loss orders or maintaining adequate funds in the account.
Normally the broker will have a minimum account size also known as account margin or initial margin e.g. 5,000-10,000. Once you have deposited your money you will then be able to trade.
The title of this article asks, can a margin call hurt me? The answer is yes and very badly. But as in any other business there are things you can do to minimize your risk.
If for any reason the broker thinks that your position is in danger, that is, you have a position of 50,000 with a margin of one percent (500.00) and your losses are approaching your margin (500.00). He will call you and either ask you to deposit more money, or close your position to limit your risk and his risk.
Automatic stop loss is utilized as the safety net where the position is forced to cut automatically when the losses are at a certain point. It happens when the balance of margin account, that is, the asset value with deducting the losses, becomes to fall short of the margin limits set by your Forex broker. This practice is a common practice in the Forex market.
There is a difference from weekday trading and over the weekend trading. Reduced leverage is available leverage for over-the-weekend. The purpose of this policy is to protect clients from the risks caused by possible price swings during market closure. This could have a very serious affect on your invested funds.
How Do I Avoid A Margin call?
There are some common sense ways to avoid a margin call
1. Good money management, manage how you trade
2. Use stop loss for every position if you don't have adequate margin
3. Do not over trade
Hopefully this article will make you aware of some of the possible pitfalls of a margin call.
Do your due diligence and you will be in a better position than many other investors.
There are many automated Forex Systems available. Look around and compare features.
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Is There a Risk With Forex Margin
Forex (foreign exchange market) is an international exchange market where currency is traded. It is the largest liquid financial market in which a single day trade can reach the 2 trillion dollars mark. With this much money flowing in a market, the prices of currencies are is not significantly affected by transactions. Therefore there are very small intraday variations in the price of the currencies. So, in order to make significant profits in forex trading you need to invest a large sum of money.
In forex you can increase your investment power by opening a forex margin account with your broker. Margin account enables you to make larger transactions and thus magnifies both your profits and losses. By opening a margin account the investor borrows a sum of money from the broker to invest in the market. To open a forex margin account some initial money has to be deposited into the account by the user. This money depends upon the agreement between the broker and the user. Usually when trading in a currency unit or more the margin percentage is about one to two percent. This means that you can trade up to 100,000 by depositing 1000 in your margin account. The rest of the money 100,000 -1000 is provided by your broker. It is attractive because one can make larger transactions with smaller initial capital. No interest is charged by the broker on the borrowed money amount unless you fail to clear all your positions before the delivery date.
Here is an example which will clearly indicate the benefits of margin forex trading: Suppose you feel that rate of a British pound is going to increase against the US dollar. You buy British pounds worth 100,000 at a margin of 1%. Now you wait for the price to increase and then you sell your holding when the price increases by 0.0061. Thus you make a profit of 610 by investing just 1000, a profit percentage of nearly 60%.
A margin call is initiated by broker when the broker feels that investor's position has worsened. When a forex margin call is initiated the investor needs to deposit more money into his margin account or close all existing positions. If the client is not able to deposit the additional margin money the broker sells the holding of the client in order to reduce his own risk. This is generally the case when market falls much more than the expectations of the investor and they are not in a position to put in more money.
Is Trading on Forex Margin For You?
OK, you have done your research and are familiar with the investment style and strategy on not only your on-line forex broker, but also you own investment style and whether you tend to be more conservative or an investor with significant tolerance to risk. Knowing the margin requirements of the on-line forex broker you chose is important in your overall forex trading/speculating strategy.
Forex brokers require margin posted as collateral to cover any potential losses on your account to protect themselves from the potential losses of their respective clients. To protect themselves, the frequently require a "minimum" available margin balance for any open positions you may carry. For example, at a leverage of 100:1, if you are holding a 100,000 position in USD/CHF, you will be required to have at the very least 500 of available margin to continue to hold that position. Potentially, if you position falls below that margin, even for only a split second, your broker has the right to liquidate or close out your position. Thereby locking in your losses and reducing your available margin balance.
Brokers typically monitor margin balances via computer programs designed for the specific purpose of monitoring current market prices. If your position moves below the required level to hold that position, your position is closed with no margin call or notification to you. The position is simply liquidated.
As a trader in the FX, it is your responsibility to read and know the minimum margin requirements and liquidation policy before you begin to trade. If you have done your homework and are working with a regulated forex broker, their policies must be disclosed in your account agreement. It may seem unfair that the broker can liquidate your position, but the reality is they must liquidate the position to keep your loss from becoming their loss.
Minimum margin requirements vary from broker to broker, by account size and with the closing of certain positions. For example, some brokers may close all losing open positions all at once while other close the largest losing positions first until the minimum requirement is met for the remaining open positions. Again, as a trader, you want to ensure that you factor in the minimum margin requirement into your overall trading plan and you should never come close to that minimum during your trading. Should this be the case, you may need to consider looking for another trade opportunity with lower risk.
Forex Margin Trading - What You Need to Know About Leverage
There are several methods to apply leverage through which you can increase the actual purchasing power of your investment, and Forex margin trading is one of them. This method basically allows you to control large amounts of money by using just a small sum. Generally, currency values will not rise or drop over a certain percentage within a set period of time, and this is what makes this method viable. In practice, you are able to trade on the margin by using just a small amount, which would cover the difference between the current price and the possible future lowest value, practically loaning the difference from your broker.
The concept behind Forex margin trading can be encountered in futures or stock trading as well. However, due to the particularities of the exchange market, your leverage will be far greater when dealing with currencies. You can control as much as up to 200 times your actual account balance - of course, depending on the terms imposed by your broker. Needless to say that this may allow you to turn big profits, however you are also risking more. As a rule of the thumb, the risk factor increases as you use more leverage.
To give you an example of leverage, consider the following scenario:
The going exchange rate between the pound sterling and the U.S. dollar is GBP/USD 1.71 (1.71 for one pound sterling). You are expecting the relative value of the U.S. dollar to rise, and buy 100,000. A few days later, the going rate is GBP/USD 1.66 - the pound sterling has dropped, and one pound is now worth only 1.66. If you were to trade your dollars back for pounds, you would obtain 2.9% of your investment as profit (less the spread); that is, a 2,900 profit from the transaction.
In reality, it is unlikely that you are trading six digit amounts - most of us simply cannot afford to trade on this scale. And this is where we can use the principle behind Forex margin trading. You only need to provide the amount which would cover the losses if the dollar would have dropped instead of rising in the previous example - if you have the 2,900 in your account, the broker will guarantee the remaining 97,100 for the purchase.
Currently, many brokers deal with limited risk amounts - which means that they handle accounts which automatically stop the trades if you have lost your funds, effectively preventing the trader from losing more than they have through disastrous margin calls.
This Forex margin trading method of using leverage is very common in currency trading nowadays. It's very likely that you will do it in the near future without so much as a single thought about it - however, you should always keep in mind the high risks associated with a lot of leverage, and it is recommended that you never use the maximum margin allowed by your broker.
Zachary Bradford enjoys testing and writing about new financial products on his blog BradfordReviews.com. With all the options available it is his goal is to make it easy to find the best solution. He also enjoys rock climbing and the outdoors.
What is Forex Margin Trading?
Forex margin trading are essentially borrowing money from the broker to increase the amount you can invest in a currency. It is like using the brokers money to increase the overall profit margins on a trade. Usually people do this that don't have a lot of money. If you only have a 1000 and you want to move around 10000 than you're going to need to do margin trading.
Basically the way it works is you sign up for the services of a broker. This can be both online or offline. You're going to to sign up for a margins account. You're going to have to make a deposit into the account. Basically before you put the money in you'll have an amount of leverage. If you put in a 1000, you maybe allowed to move around 10,000. It really depends on how much the margin is. Essentially if we use this numbers, you invest 1000 into the account and your broker is lending you 9000, allowing you to move around 10,000.
You do not pay interest on this "loan", but that's not to say this is just some easy way to get money. Basically you're going to have a delivery date. If you don't close by than you're going to end up being rolled over and you could be charged interest. Also the broker will be watching your trading. When your account starts to approach a 1000 in losses, what will happen is called a margin call. This basically means you're going to need to deposit more money or you're going to be immediately exited from trades to prevent a loss in excess of your original deposit.
Forex margin trading definitely isn't some easy money loan system, it is something you can use for leveraging your trades. Your broker will be watching you and won't allow you to fall below your original deposit. If you want to stay safe with margin training, only use a percentage of the money you get. Instead of using the full 10,000, just trade with 2000. You will rarely ever make it to a margin call.
Forex margin trading is usually carried out through the broker and in order to indulge in this form of trade one needs to entail the services of a forex broker who offers margin trading as a part of a bigger package deal. This is owing to the fact that the concept of trading on forex margin is based on acquiring a short term loan from the broker for the purpose of indulging in trade and in return paying him a certain percentage of profits. Therefore, one first needs to open an account with the broker, deposit a certain amount of finances in it and then use forex margin trading to gain leverage and make a foray into the actual forex market.
Although forex margin trading is considered to be an advantage of forex trading, a word of caution here would be pertaining to the proverbial two sides of the same coin. This implies that a forex trader might well be aware of the fact that if he can use the leverage option effectively, he stands to make phenomenal profits but at the same time if his investments turn out to be loss making then the extent of financial losses which would be incurred would also be manifold. This is evident from the fact that there are many people who complain of having lost out heavily due to forex trading and this is usually the case when people are misinformed about the market and make an educated use of the forex margin option.
---------------------------------------------------------------
Understand the Importance of the Forex Margin Before You Trade Forex
Forex margin denotes the amount of money in your trading account that is available for you to trade. This amount basically depends upon the amount of equity in your account. From the total amount of equity in your account if you subtract the amount of margin already used, the balance represents margin amount available for use to trade forex.
Standard accounts, mini accounts and micro accounts are the three types of forex accounts that traders normally use. Micro accounts allow forex traders to trade in the smallest of lot sizes that generally is 1000 units of the base currency. In the mini account, trades can be undertaken in lot sizes of 10,000 units of the base currency. In the standard forex account, trades happen in 100,000 units of the base currency. Standard account is most the popular account used by professional forex traders.
At any point of time if the equity in your account falls below the amount of forex margin used, then your broker will initiate a margin call. The call is made to recover the drop in your equity value. To give an example, if you have 20,000 in your account, your usable margin will be 20,000.00. If you buy lots worth 14,000, the remaining usable margin will be 6000 in your forex account. In case the value of your investments falls by a few pips causing the equity value to drop down from 20000 to 14000, your broker will trigger a margin call. Effectively this will result in you losing 6000 of your investment capital.
Forex market is ever changing with frequent currency price fluctuations. Margins can get eroded in no time unless you trade cautiously. One of the key aspects of forex trading therefore is to manage your forex margin effectively. Skilled technical analysis and money management strategies will help you minimize your losses to a very large extent. In addition abstain from committing mistakes like overtrading which can at times erode your entire margin amount. Also keep a close track of your trading account balance. Unless you are aware of when your account runs into margin call, you will have no idea on when to cut your losses.
Forex market trading is no longer the domain of large institutions alone. Ordinary people like you and me can easily learn the basics of forex trading education and start trading profitably in the market.
--------------------------------------------------------------
Forex Hedging and Forex Margin
Forex trading has risen significantly in popularity over the past ten to twelve years or so and many new Forex traders are eager to learn some of the more creative ways different traders are making a profit. Two of the most prevalent techniques that have allowed currency traders to leverage their investments even more are Forex hedging, and trading on what is called a Forex margin.
Both of these methods can by used in synchronous fashion although each can be used separately without the other and this will depend heavily on the individual trader's own preferences. Using Forex hedging and a Forex margin can greatly increase your overall power with Forex, and using these methods can give you the edge to become a profitable trader over time.
So what is Forex hedging and Forex margin? Forex margin is essentially when a particular Forex trader is taking advantage of a short-term credit from a particular organization that may be offering such a credit. This credit is in actuality the margin the trader will use to make trades and it can allow the trader to leverage his investment at sometimes at around twenty times his initial investment. This can give a Forex trader more leverage than they ever could have with just their initial investment, and this is how much of the independent Forex traders around the world utilize their capital with Forex.
Forex hedging is an entirely different thing than trading on a Forex margin although the two are often used together by many of the best Forex traders. Forex hedging is essentially a technique used by many Forex investors to try and offset some of their risk by taking opposing positions in terms of currency pairs and trades. Having varying positions is supposed to give the trader a shield against certain losses and this can give the trader a greater amount of control over time if it is done correctly.
Forex hedging has come under scrutiny lately with the CFTC approving a new compliance rule that will make the implementation of such hedging techniques a bit more difficult. Regardless, traders will always find a way to use hedging in Forex and often times they will use their Forex margin in accordance with their hedged positions so that they can gain better spread across the entire market. In the end it is up to you if you utilize each separately or both together at the same time, but just remember that both can make you a lot of money if done correctly.
--------------------------------------------------------------------------------
Sistema Forex - Margin Trading In The Forex
Now you might be wondering how it is possible to earn big money trading the Forex? The answer is Margin trading. In other words you trade with borrowed money.
Forex is always traded in Lots, so in actual fact you cannot purchase just 100 Euros, (or in fact 100 units of any
currency). A standard Lot is 100,000, some brokers offer Mini-Lots of 10,000, and a few brokers also offer Micro-Lots of 1,000. The good news is you don't need anything like 100,000 to open a Forex account or to trade the Forex.
The Forex market uses a system called Margin trading, where you pay the broker a security margin, usually between 0.25 and 5 percent. The security margin gives you control over a very much larger unit (or lot) of currency. For example, to trade a standard lot 100,000, your broker will probably require a margin (deposit) of 1 percent = 1,000. (In actual fact you will need more than 1,000 in your account, in case the market moves against you.
Suppose you sell 100,000 and buy Euros at 10:00 AM. The Euros will cost 1.4725 each. So you will receive (rounded) 67912 EUR. Your 67912 EUR will have a value of 67912 x 1.4720 = 99,967 (Note: You have lost 33 instantly because of the bid/ask spread.) Now, suppose you sell your Euros at 5 PM and close the trade. You sell your 67912 EUR and buy U.S. dollars. You receive 1.4770 for each Euro = 67912 x 1.4770 = 100,306. So you make an overall profit of 306 on the days trading.
Margin trading is an example of leverage (sometimes called gearing), where you are using a relatively small amount of money to control (or lever) a very much larger amount of money. This enables you to profit (or lose) from very small changes in Forex quotes.
If you trade with 1,000, you will need more than 1,000 in your account. In the example above, if you only had 1,000 in your account to start, you would have a negative amount (-33) in your account immediately after your trade was opened.
Now, suppose you started with 2,000 in your account:
You sell U.S.100,000 and buy Euros at 10:00 AM. Your used margin is now 1,033, so the usable margin in your account is 2,000 - 1,033 = 967. Imagine the trade moves against you, so that at 12:14 PM the Forex quote: EUR/USD = 1.4578/1.4583. Your 67912 EUR are now worth 67912 x 1.4578 = 99,002, and the usable margin in your account = 2,000 - 1,998 = 2. This would result in a margin call, and your trade would be closed to prevent your account going negative, so you would lose 1,998.
If however, you had 3,000 in your account, your trade could have continued:
If the trade had continued moving against you so that at 1:00 PM the Forex quote: EUR/USD = 1.4570/1.4575. Your 67912 EUR are now worth 67912 x 1.4570 = 98,948. Your used margin is now 2,052 but you still have 3,000 - 2,052 = 948 in your account, so you can continue trading. If the Euro then recovers, so that at 5:00 PM the Forex quote: EUR/USD = 1.4770/1.4775, you sell your 67912 EUR at 1.4770 each and make an overall profit of 306.
Always aim to have at least twice your margin in your account at all times (even when a trade moves against you). However, it is safer still if you never trade with more than 10 percent of your account at any time.
Margin Percent = 100/Leverage
Leverage = 100/Margin Percent
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A Forex Margin Call - What is it and Can a Margin Call Hurt Me?
A Forex Margin call happens when a client's account equity falls below the required margin.
Leverage financed with credit, which is a description of what a margin account entails. This is very common in Forex. A margined account is a leverageable account in which Forex currencies can be purchased for a combination of cash or collateral. Various brokers accept different limits.
Investing on margin isn't the same as gambling. There are some similarities between margin trading and the casino. Margin is a high-risk strategy that can yield a huge profit if handled correctly. The dark side of margin is that you can lose your shirt and many other assets you own. Investing on margin without understanding what you're doing is very risky.
As with any other investment research is the key to not losing your shirt! If, for instance, a client has 10 lots of open positions a margin call will occur if account equity drops below 5,000. At this point, some or all of the client's open positions will be closed immediately at current prices.
Traders are also able to monitor both usable margin and used margin from the "Account Information" window of his/her online trading platform. Positions will be automatically closed once usable margin drops below zero.
Traders may avoid margin calls by either using stop loss orders or maintaining adequate funds in the account.
Normally the broker will have a minimum account size also known as account margin or initial margin e.g. 5,000-10,000. Once you have deposited your money you will then be able to trade.
The title of this article asks, can a margin call hurt me? The answer is yes and very badly. But as in any other business there are things you can do to minimize your risk.
If for any reason the broker thinks that your position is in danger, that is, you have a position of 50,000 with a margin of one percent (500.00) and your losses are approaching your margin (500.00). He will call you and either ask you to deposit more money, or close your position to limit your risk and his risk.
Automatic stop loss is utilized as the safety net where the position is forced to cut automatically when the losses are at a certain point. It happens when the balance of margin account, that is, the asset value with deducting the losses, becomes to fall short of the margin limits set by your Forex broker. This practice is a common practice in the Forex market.
There is a difference from weekday trading and over the weekend trading. Reduced leverage is available leverage for over-the-weekend. The purpose of this policy is to protect clients from the risks caused by possible price swings during market closure. This could have a very serious affect on your invested funds.
How Do I Avoid A Margin call?
There are some common sense ways to avoid a margin call
1. Good money management, manage how you trade
2. Use stop loss for every position if you don't have adequate margin
3. Do not over trade
Hopefully this article will make you aware of some of the possible pitfalls of a margin call.
Do your due diligence and you will be in a better position than many other investors.
There are many automated Forex Systems available. Look around and compare features.
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Is There a Risk With Forex Margin
Forex (foreign exchange market) is an international exchange market where currency is traded. It is the largest liquid financial market in which a single day trade can reach the 2 trillion dollars mark. With this much money flowing in a market, the prices of currencies are is not significantly affected by transactions. Therefore there are very small intraday variations in the price of the currencies. So, in order to make significant profits in forex trading you need to invest a large sum of money.
In forex you can increase your investment power by opening a forex margin account with your broker. Margin account enables you to make larger transactions and thus magnifies both your profits and losses. By opening a margin account the investor borrows a sum of money from the broker to invest in the market. To open a forex margin account some initial money has to be deposited into the account by the user. This money depends upon the agreement between the broker and the user. Usually when trading in a currency unit or more the margin percentage is about one to two percent. This means that you can trade up to 100,000 by depositing 1000 in your margin account. The rest of the money 100,000 -1000 is provided by your broker. It is attractive because one can make larger transactions with smaller initial capital. No interest is charged by the broker on the borrowed money amount unless you fail to clear all your positions before the delivery date.
Here is an example which will clearly indicate the benefits of margin forex trading: Suppose you feel that rate of a British pound is going to increase against the US dollar. You buy British pounds worth 100,000 at a margin of 1%. Now you wait for the price to increase and then you sell your holding when the price increases by 0.0061. Thus you make a profit of 610 by investing just 1000, a profit percentage of nearly 60%.
A margin call is initiated by broker when the broker feels that investor's position has worsened. When a forex margin call is initiated the investor needs to deposit more money into his margin account or close all existing positions. If the client is not able to deposit the additional margin money the broker sells the holding of the client in order to reduce his own risk. This is generally the case when market falls much more than the expectations of the investor and they are not in a position to put in more money.
Is Trading on Forex Margin For You?
OK, you have done your research and are familiar with the investment style and strategy on not only your on-line forex broker, but also you own investment style and whether you tend to be more conservative or an investor with significant tolerance to risk. Knowing the margin requirements of the on-line forex broker you chose is important in your overall forex trading/speculating strategy.
Forex brokers require margin posted as collateral to cover any potential losses on your account to protect themselves from the potential losses of their respective clients. To protect themselves, the frequently require a "minimum" available margin balance for any open positions you may carry. For example, at a leverage of 100:1, if you are holding a 100,000 position in USD/CHF, you will be required to have at the very least 500 of available margin to continue to hold that position. Potentially, if you position falls below that margin, even for only a split second, your broker has the right to liquidate or close out your position. Thereby locking in your losses and reducing your available margin balance.
Brokers typically monitor margin balances via computer programs designed for the specific purpose of monitoring current market prices. If your position moves below the required level to hold that position, your position is closed with no margin call or notification to you. The position is simply liquidated.
As a trader in the FX, it is your responsibility to read and know the minimum margin requirements and liquidation policy before you begin to trade. If you have done your homework and are working with a regulated forex broker, their policies must be disclosed in your account agreement. It may seem unfair that the broker can liquidate your position, but the reality is they must liquidate the position to keep your loss from becoming their loss.
Minimum margin requirements vary from broker to broker, by account size and with the closing of certain positions. For example, some brokers may close all losing open positions all at once while other close the largest losing positions first until the minimum requirement is met for the remaining open positions. Again, as a trader, you want to ensure that you factor in the minimum margin requirement into your overall trading plan and you should never come close to that minimum during your trading. Should this be the case, you may need to consider looking for another trade opportunity with lower risk.
Forex Margin Trading - What You Need to Know About Leverage
There are several methods to apply leverage through which you can increase the actual purchasing power of your investment, and Forex margin trading is one of them. This method basically allows you to control large amounts of money by using just a small sum. Generally, currency values will not rise or drop over a certain percentage within a set period of time, and this is what makes this method viable. In practice, you are able to trade on the margin by using just a small amount, which would cover the difference between the current price and the possible future lowest value, practically loaning the difference from your broker.
The concept behind Forex margin trading can be encountered in futures or stock trading as well. However, due to the particularities of the exchange market, your leverage will be far greater when dealing with currencies. You can control as much as up to 200 times your actual account balance - of course, depending on the terms imposed by your broker. Needless to say that this may allow you to turn big profits, however you are also risking more. As a rule of the thumb, the risk factor increases as you use more leverage.
To give you an example of leverage, consider the following scenario:
The going exchange rate between the pound sterling and the U.S. dollar is GBP/USD 1.71 (1.71 for one pound sterling). You are expecting the relative value of the U.S. dollar to rise, and buy 100,000. A few days later, the going rate is GBP/USD 1.66 - the pound sterling has dropped, and one pound is now worth only 1.66. If you were to trade your dollars back for pounds, you would obtain 2.9% of your investment as profit (less the spread); that is, a 2,900 profit from the transaction.
In reality, it is unlikely that you are trading six digit amounts - most of us simply cannot afford to trade on this scale. And this is where we can use the principle behind Forex margin trading. You only need to provide the amount which would cover the losses if the dollar would have dropped instead of rising in the previous example - if you have the 2,900 in your account, the broker will guarantee the remaining 97,100 for the purchase.
Currently, many brokers deal with limited risk amounts - which means that they handle accounts which automatically stop the trades if you have lost your funds, effectively preventing the trader from losing more than they have through disastrous margin calls.
This Forex margin trading method of using leverage is very common in currency trading nowadays. It's very likely that you will do it in the near future without so much as a single thought about it - however, you should always keep in mind the high risks associated with a lot of leverage, and it is recommended that you never use the maximum margin allowed by your broker.
Zachary Bradford enjoys testing and writing about new financial products on his blog BradfordReviews.com. With all the options available it is his goal is to make it easy to find the best solution. He also enjoys rock climbing and the outdoors.
What is Forex Margin Trading?
Forex margin trading are essentially borrowing money from the broker to increase the amount you can invest in a currency. It is like using the brokers money to increase the overall profit margins on a trade. Usually people do this that don't have a lot of money. If you only have a 1000 and you want to move around 10000 than you're going to need to do margin trading.
Basically the way it works is you sign up for the services of a broker. This can be both online or offline. You're going to to sign up for a margins account. You're going to have to make a deposit into the account. Basically before you put the money in you'll have an amount of leverage. If you put in a 1000, you maybe allowed to move around 10,000. It really depends on how much the margin is. Essentially if we use this numbers, you invest 1000 into the account and your broker is lending you 9000, allowing you to move around 10,000.
You do not pay interest on this "loan", but that's not to say this is just some easy way to get money. Basically you're going to have a delivery date. If you don't close by than you're going to end up being rolled over and you could be charged interest. Also the broker will be watching your trading. When your account starts to approach a 1000 in losses, what will happen is called a margin call. This basically means you're going to need to deposit more money or you're going to be immediately exited from trades to prevent a loss in excess of your original deposit.
Forex margin trading definitely isn't some easy money loan system, it is something you can use for leveraging your trades. Your broker will be watching you and won't allow you to fall below your original deposit. If you want to stay safe with margin training, only use a percentage of the money you get. Instead of using the full 10,000, just trade with 2000. You will rarely ever make it to a margin call.
