If I Get A "Margin Call", What Does It Mean?

You will hear the term "margin" used frequently in connection with Forex trading. The idea of "margin" is tied up with the term "leverage". If your broker or trading platform requires a 1% margin, this means that with a starting capital of $1,000 you can trade with $100.000. In other words, you are using a leverage of 1:100.

If your broker or platform requires a 2% margin, that means you would need $2,000 to trade with 10,000 - that's a leverage of 1:50. Easy-Forex is one of the few platforms providing a leverage of 1:200 - that means with a margin of $1,000 you can control $200,000 of trading. But you can actually start with as little as $100, which enables you to trade with $20,000 - you can do a lot with that!

Now - suppose you have a margin requirement of 1% and you have a margin of $2,000, which gives you a leveraged float of $200,000. And suppose you make a trade with a face value of $100,000, such as buying USD/JPY, which means you use $1000 of your margin and have $1000 left. If the trade goes against you by $1000, you will lose your remaining margin. So you will get a MARGIN CALL, requiring you to place more funds into your account. If no funds are forthcoming your position will be closed out.

If this happens to you it means you have not been using appropriate money management - look at last week's posts to remind you of what this means. At the very least you should have placed a stop loss. A margin call should not be necessary if you have learned your money management lessons. And there is plenty more to learn at http://www.bizwrite.co.uk/Forex/forexindex.html