Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

What is Margin? Forex Basics

Forex Educational Video Series

Author: Andreas Thalassinos (BSc, MSc, MSTA, CFTe, MFTA), Head of Education at FXTM.

What is Margin in Forex trading?

Margin is the amount of funds that the broker requires from the trader in order to cover any potential losses, since a trader is allowed to use more capital than the amount he or she initially deposited. It’s like a good faith deposit that’s represented as a percentage and directly connected to the leverage you are trading with. Another way of describing margin is that it’s the amount you need to have in your account in order to keep a position open. For example, if a trader was to deposit $20,000 in an account with 1:25 leverage, the margin set by the broker would be 4%. This means that if the trader were to buy 2 lots of EURUSD at 1.2000, he would need $9,600 (4% of $240,000 (200,000 x 1.2000)) in his account to keep his position open.

Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.

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