In the last post we clarified what was meant by a MARGIN in Forex trading. It's tied up with the concept of LEVERAGE, which means that if you are trading on a 1% margin, you can use a starting capital of $1,ooo to trade with $100,000.
Forex trading on margin is also bound up with the concept of spot Forex. The spot Forex market is the biggest Forex market that is traded - much bigger than the futures market. Most providers of spot forex charge no commission because they make their profits on the spread (see posting of January 15).
A spot contract in Forex trading means that when you buy or sell a currency, the settlement date is in two business days. In Forex trading on margin you need to provide 1 percent or more of the face value, depending on the margin requirement of your broker or trading platform. (1 percent represents a leverage of 1:100. A few trading platforms, such as Easy-Forex, provide a leverage of 1:200.)
If you hold the position longer than one trading day the provider will "roll over" your position to the next trading day. (Rollover time is 5 p.m. EST.) If the currency you have bought has a higher rate than the one you have sold, you will receive a rollover fee. If the opposite is true, you will be CHARGED a rollover fee. For most providers you will need at least 2-5 percent of margin in your account to benefit from rollover payments.
Remember that Forex trading on margin carries a high degree of risk. What's more, the higher the leverage, the higher the risk. So you need to be extremely careful not to invest money you can't afford to lose. I know I have said this several times but it can't be emphasized too often.
Trading with Easy-Forex can really help you to minimize risk because you have the benefit of their one-to-one advice and tuition from the very start. You can also find the answers to a lot of questions at http://www.bizwrite.co.uk/Forex/forexindex.html
Forex trading on margin is also bound up with the concept of spot Forex. The spot Forex market is the biggest Forex market that is traded - much bigger than the futures market. Most providers of spot forex charge no commission because they make their profits on the spread (see posting of January 15).
A spot contract in Forex trading means that when you buy or sell a currency, the settlement date is in two business days. In Forex trading on margin you need to provide 1 percent or more of the face value, depending on the margin requirement of your broker or trading platform. (1 percent represents a leverage of 1:100. A few trading platforms, such as Easy-Forex, provide a leverage of 1:200.)
If you hold the position longer than one trading day the provider will "roll over" your position to the next trading day. (Rollover time is 5 p.m. EST.) If the currency you have bought has a higher rate than the one you have sold, you will receive a rollover fee. If the opposite is true, you will be CHARGED a rollover fee. For most providers you will need at least 2-5 percent of margin in your account to benefit from rollover payments.
Remember that Forex trading on margin carries a high degree of risk. What's more, the higher the leverage, the higher the risk. So you need to be extremely careful not to invest money you can't afford to lose. I know I have said this several times but it can't be emphasized too often.
Trading with Easy-Forex can really help you to minimize risk because you have the benefit of their one-to-one advice and tuition from the very start. You can also find the answers to a lot of questions at http://www.bizwrite.co.uk/Forex/forexindex.html
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