What is margin and leverage?

Margin and leverage are concepts that allow traders to open large positions with small deposits. What is margin? Margin trading refers to using borrowed funds from a broker to purchase a financial asset or assets in a larger volume. Traders use margin to buy more stock than they would normally be able to (or afford to do).

What is leverage in forex trading?

Now that you know what leverage is, margin is easy: in Forex trading, margin is a sum of money that is required from you to open a position. The €10 the trader provides in case of using 1:100 leverage in the example above is the margin. The funds that you hold in your trading account is the money you use as margin when trading on Forex.

What is margin trading?

Margin trading refers to using borrowed funds from a broker to purchase a financial asset or assets in a larger volume. Traders use margin to buy more stock than they would normally be able to (or afford to do). Margin is then used to create leverage to enter larger trades or open larger positions, in a bid to magnify gains.

Is it safe to trade with leverage?

Trading with leverage is inherently dangerous. With leverage, losses and costs – the two great killers for traders – are magnified. This does not mean leverage must be avoided altogether, but it does mean that it needs to be used safely. In Leveraged Trading, Robert Carver shows you how to do exactly that, by using a trading system.