The margin trading was one of the keystones that allowed everyone to just turn into a trader without having to have huge sums.One wonders how it is possible to control the amounts of $ 100,000 in with only $ 1,000. The principle is simple enough, and contrary to what the individual thinks sometimes, your broker does not lend you a dollar to play the markets, it just gives you access to capital markets knowledge that they do not directly accessible.
To understand how this is possible, consider an analogy with a water tank.
Suppose a rule requires that anyone with such a reservoir is forced to permanently maintain the height hd'eau.
If the level drops, we have to add water, whereas if the level rises it will be necessary to remove.
At first glance one might think that to own such a tank, an individual should have the means to fill to the height h and then to keep up.Imagine that it be provided with pre-filled reservoir. The only ability to fulfill the red part allows an individual to own the tank.
This is exactly how does the margin trading, a red from the surface you control the entire surface. When you are in long position, you are exactly as in the case of the tank. If the course (the level) it will decrease the money supply (of water) taken from your account to meet the standard. If the price down, then the excess will be refunded to your account.
When the level drops, and filling the tank is empty, then we must put water in the reservoir or the system stops.
By analogy, to maintain the height h corresponds to the position you took. The reservoir is filling your account. The level change is the change of the course. The trading platform is constantly calculating the need to hold your position, and credits or debits to your account. If your account is empty, then you receive a request to add the water, which corresponds to a margin call. To you then decide whether to add water or the system automatically closes your position.In one configuration winner, you stop yourself by closing your position and content of the filling tank is yours.
In the FOREX, a variation of the exchange rate rarely exceeds 1%, which is used to control very large amount and benefit from the leverage is very important. Conversely, this same leverage that can be very devastating when the market is not going in the right direction compared to the open position.
By analogy, the higher the leverage, the bigger the tank is large
Understandably, the same height variation made in the previous example, generate a much larger red area
And therefore the margin requirements are much greater.
Conversely, it would be the same for either a winner and gain greater.
Currently there are two main types of margin trading which work exactly the same principle. FOREX (foreign exchange) and CFD (contract for difference).
To understand how this is possible, consider an analogy with a water tank.
Suppose a rule requires that anyone with such a reservoir is forced to permanently maintain the height hd'eau.
If the level drops, we have to add water, whereas if the level rises it will be necessary to remove.
At first glance one might think that to own such a tank, an individual should have the means to fill to the height h and then to keep up.Imagine that it be provided with pre-filled reservoir. The only ability to fulfill the red part allows an individual to own the tank.
This is exactly how does the margin trading, a red from the surface you control the entire surface. When you are in long position, you are exactly as in the case of the tank. If the course (the level) it will decrease the money supply (of water) taken from your account to meet the standard. If the price down, then the excess will be refunded to your account.
When the level drops, and filling the tank is empty, then we must put water in the reservoir or the system stops.
By analogy, to maintain the height h corresponds to the position you took. The reservoir is filling your account. The level change is the change of the course. The trading platform is constantly calculating the need to hold your position, and credits or debits to your account. If your account is empty, then you receive a request to add the water, which corresponds to a margin call. To you then decide whether to add water or the system automatically closes your position.In one configuration winner, you stop yourself by closing your position and content of the filling tank is yours.
In the FOREX, a variation of the exchange rate rarely exceeds 1%, which is used to control very large amount and benefit from the leverage is very important. Conversely, this same leverage that can be very devastating when the market is not going in the right direction compared to the open position.
By analogy, the higher the leverage, the bigger the tank is large
Understandably, the same height variation made in the previous example, generate a much larger red area
And therefore the margin requirements are much greater.
Conversely, it would be the same for either a winner and gain greater.
Currently there are two main types of margin trading which work exactly the same principle. FOREX (foreign exchange) and CFD (contract for difference).
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