18. What is Margin?

November 14, 2022
Margin is a small number of capital traders use to maintain a position. It is a part of the trader's account balance set aside to keep the position open.

Margin is a part of the trader's account balance that is set aside in order to keep a trading position open. The amount of margin required by each broker can vary depending on their policies. Usually, the margin will be expressed as a percentage of the full position. It can vary from  0.25%, 0.5%, 1%, 2%, 5%, 10%, or higher, depending on the leverage used. This also knows as the margin requirement.

For example, a trader wants to buy 1 lot of EUR/USD at the price of 1.1200. If they don't use any leverage, their margin requirement would be 100%. But if they use 1:50 leverage, they would only be required to put 2% as margin.

Here are the comparisons:

  • Scenario without leverage:
    Margin requirement = 1 lot x 1.1200 x 100,000 = $112,000
  • Scenario with 1:50 leverage:
    Margin requirement = (1 lot x 1.1200 x 100,000) / 50= $2240

Education (46)

1. What Is Forex? 2. Why Does Forex Market Exist? 3. What Drives the Forex Market? 4. Why is Forex Trading Popular? 5. Can I Get Rich in Forex? 6. Are You Curious? Want to Discover More about Forex Trading? Meet Demo Acount! 7. I'm a Newbie, How to Master Forex Trading? 8. What Forex Knowledge Should I Conquer? What Are the Steps to Go Thorugh the Journey? 9. What are Software and Glossaries in Trading Forex? 10. How to Read the Forex Market? 11. How to Practice Forex Trading? 12. How to Ride on the Forex Wave? 13. How to Prepare Basic Trading Requirement? By the Demo Account? What about the MT4/MT5? 14. What is Bid-Ask Spread? 15. What is Pip? 16. What is Lot Size 17. What is Leverage in Forex Trading? 18. What is Margin? 19. When to Trade Forex? 20. What is the Most Dominant Market in Forex? How is the Characteristic? 21. What is Chart in Forex? 22. What is Candlestick? Why is It the Most Popular Chart in Forex? 23. What is Technical Analysis? 24. What is Fundamental Analysis? 25. What are MT4 Indicators and How to Use Them? 26. What is Risk in Forex? 27. What is the Psychological Effect in Forex Trading? 28. How to Compile a Strategy Template? 29. How Long Should You Practice in a Demo Account? 30. When Do I Need to Start Learning about Brokers? 31. What Exactly Does a Forex Broker Do? 32. Can I Trade Forex without Broker? 33. How Much Money Do You Need to Trade in Forex Brokers? 34. How to Choose a Good Forex Broker? 35. What is Regulation? And Why Should Regulation Exist? 36. Why Should You Choose Forex Brokers with Top-tier Regulations? 37. How to Choose Forex Brokers Based on Your Need and Where You Are From? 38. What Brokers Should You Avoid? 39. Is There Any Broker Scam in History? How Bad Is It? 40. What are the Most Popular Brokers in The World? 41. What are the Best Brokers For Entry-Level Traders? 42. What are the Best Brokers for Traders with Minimum Deposit Capabilities? 43. Which Broker Provides a Demo Account and Easy Setup? 44. Which Broker Provides Easy Registrations? 45. What and How to Deposit on Forex Brokers? 46. What and How to Withdraw from Forex Brokers?




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