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MarginForex trading exploits small movements in exchange rates and would not be an attractive proposition if the trader had to have the capital to actually purchase the foreign currency outright. Brokers require traders to have only a proportion of the full cost in their account and this proportion is known as margin. The size of the margin (known as margin requirement) will vary by broker and by currency. Margin requirements change over time depending on the level of volatility in the instrument being traded. If a trade moves against you, the unrealised losses are deducted from the balance on your account along with the margin, to determine how much capital you have available for further trades. If this amount gets to zero, then the broker will expect you to deposit more funds or else to close positions. Some brokers will contact their clients to make a margin call, others will close out your positions automatically. With most brokers, you can lose all the money in your account and still be asked to pay up more to cover your losses. |