HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
NordFX information and reviews
NordFX
86%

Everything you need to know about Margin Trading


How can you become more skilled in online CFD trading? The key is to possess as much knowledge as possible about anything that concerns the financial markets and the available trading tools and resources. The more you know about the industry, the more confident you will be in making trading decisions that suit your trading plan.

One of the most essential components of trading-related knowledge is the trading jargon used globally. Terms such as candlesticks, bear/bull market, Fibonacci, and stop loss orders, are some of the most commonly used terms on a daily trading basis.

Let’s take a look at a term you have probably encountered a lot as a trader – Margin Trading. 

What is Margin Trading?

Margin is the difference between the value of the investment and the amount borrowed from a broker to purchase it. This means that trading on margin involves borrowing funds from a broker to buy or sell a financial asset, which serves as collateral for the loan. Trading on margin also gives traders the ability to enter into trading positions larger than the small amount of capital required to open the position. This amount varies depending on the asset and your chosen broker’s margin requirement.

Everything you need to know about Margin Trading

Margin-Leverage Relationship

To fully understand the meaning of margin we need to see the relationship it holds with Leverage. In simple terms, you use margin to create leverage. Leverage is what allows traders to trade positions larger than the amount they have in their trading account and it expresses the ratio between the number of funds a trader has and the amount they can trade.

Therefore, leverage has an inverse relationship to margin, the higher the margin requirement, the lower your leverage ratio will be.

What to keep in mind

CFD brokers such as XPro Markets set their own Margin Call Levels and Stop Out Levels. Make sure you know what your broker's Margin Call and Stop Out Levels are. For instance, brokers may set their Margin Call Level at 100% and Stop Out Level at 20%. In this case, the broker will send you a warning if your Margin Level drops below 100%, indicating that you must close the trade or deposit more money in order to avoid reaching the Stop Out Level.

A broker will automatically close your position at the best possible price if your Margin Level continues to drop and reaches 20%. The responsibility for ensuring your account meets the margin requirements ultimately lies with you, and if it fails in that regard, your broker may liquidate any or all open positions ("Stop Out").

The bottom line is that trading on margin has both benefits and drawbacks. While it opens a door to many possibilities in the markets, it also entails higher risk. This is why it is always best to stay on top of trading news and terms so as to be better prepared for different market conditions. 

Risk Warning: Contracts for Difference (‘CFDs’) are complex financial products, with speculative character, the trading of which involves significant risks of loss of capital. 
Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.

#source


RELATED

Forex signals and strategy systems in currency trading

Exchange of a nation's currency for that of another is Foreign Exchange (FOREX). The foreign exchange market is a largest non-stop financial market in the world...

How To Strategically and Effectively Diversify A Currency Trading Portfolio

In the multifaceted arena of currency trading, a trader’s success pivots not solely on precise market analysis and judicious decision-making but significantly on the astute construction of the trading portfolio...

Turtle Trading Strategy Explained

Currently, the forex market offers numerous different tools to improve trading. Experts in financial markets develop both simple trading strategies, which will be convenient...

Top Bitcoin Trading Strategies to Make Money

The phenomenon that is Bitcoin has gripped the mainstream market primarily due to the fact that the digital currency has shown it is a good way for people to make money...

TOP 3 most profitable forex strategies

The need to have your own trading strategy is written in almost every trading manual. Firstly, the process of creating your trading scheme allows you to bring...

How To Short Crypto And Risks To Consider

The essence of trading is simple: buy cheap and sell dear. This is the most common earning strategy, but not everyone knows that there are other ways to make money in exchange trading...

Scalping or Day Trading. Which trading style should a trader choose?

Among the many popular trading styles with both beginners and experienced traders are scalping, which allows you to extract small portions of profit from each price movement, and day trading, which aims to trade over a single day.

Beginner’s Guide: How to Hedge Your Crypto Portfolio

Although the cryptocurrency markets offer numerous opportunities due to their volatility, they can also lead to significant fluctuations in profit and loss, causing uneasiness. Employing hedging strategies...

What Is Scalping Trading in Cryptocurrency?

Scalp trading in crypto is a strategy that short-term traders employ to take advantage of trading opportunities. It is not a novice, but it can be profitable. The professional scalper...

Mastering Pivot Points: A Comprehensive Guide to Trading Strategies

Pivot Points are indispensable tools for traders, derived from the prior day's trading range, offering insights into potential trades and serving as vital indicators in technical analysis...

Best gold trading strategies

Gold is one of the world’s oldest and most trusted forms of currency. For traders, gold's intrinsic value, or “safe haven” appeal - makes it a popular investment and a great way to diversify a portfolio...

Dancing to different beats: differences between scalping and day trading

Scalping and day trading may seem like twins, but they dance to different rhythms. Let’s uncover their disparities. While both day trading and scalping are short-term trading strategies...

Top trading strategies

Are you lost in a huge amount of forex strategies? Are you looking for the perfect one? We've made a list of the best trading strategies for you! Read short summaries...

Trading with News

In this article, we discuss the role of news and economic data releases in forex trading and how traders can incorporate this information into their trading strategies...

How To Cut Losses Trading Cryptocurrencies

Even good trading and investment strategies can lead to portfolio losses if the basic rules of money management are neglected. In addition to the basic rules typical for investing and trading any assets...

How to Create a 24 Hour Forex Market Trading Strategy

One of the essential components of becoming a successful trader in the 24 hour Forex market is having a trading strategy. A trading strategy provides direction on which markets to trade...

The Comprehensive Beginner's Guide to Trend Trading Strategies and Effective Risk Management

Trend trading, a cornerstone strategy in financial markets, offers traders the opportunity to capitalize on significant price movements, whether they're heading upwards or downwards...

Guide to Short Selling: Navigating and Capitalizing on Market Declines

Short selling stands out in the financial world as a unique trading strategy that allows investors and traders to gain from declining asset prices. This approach, though less conventional than straightforward buying...

Ten steps to building a winning trading plan

Trading can be a profitable and exciting endeavour, but it requires careful planning, implementation, and monitoring. Building a winning trading plan is crucial to achieving success in the markets...

Best ETF Trading Strategies For Traders To Consider

Exchange-traded Funds (ETFs) offer diversification, low cost and flexibility. They are also well-suited to a variety of trading strategies, ranging from basic to advanced...

Vantage information and reviews
Vantage
85%
FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.