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  • Beginner
  • Intermediate
  • Advanced
  • Completion
  1. Beginner
    Early Stages for Beginners
    8 Topics
  2. Forex Terminology
    11 Topics
  3. Margin & Leverage
    2 Topics
  4. Personal Psychology Questions
    2 Topics
  5. Psychology for Beginners
    7 Topics
  6. Intermediate
    Identifying Scams
    2 Topics
  7. Brokers for Beginners
    5 Topics
  8. Technical Analysis
    13 Topics
  9. Market Structure
    5 Topics
  10. Completion
    Risk Management for Beginners
    8 Topics
  11. Fundamental Analysis
    9 Topics
  12. Advanced
    Using Indicators
    6 Topics
  13. Technical Analysis (Part 2)
    8 Topics

Margin and Leverage

Margin essentially prevents your account from going into the negatives. It’s basically your broker’s way of insuring you in case you decide to blow your entire account off one trade to make sure your account doesn’t go to NEGATIVE -$50 meaning you owe -$50 to the broker. In most all cases, if you opened a trade without a stop loss and just let it run against you, even if it blows your account, it won’t take your account from a $2000 account to a -$10,000 account where you would owe the broker -$10,000. Even without a stop loss, your broker will close out the trade because you’re losing too much money. This is called: Margin Call. Our entire next section is dedicated to Margin & Leverage. But back to margin:

Your broker will put a certain amount of money or percentage (varies) to the side to essentially cover any future losses. This money that’s put to the side (deposit) will be decided on by your broker.

Leverage is the complete opposite, and most new traders love it. A lot of traders wonder how they’re able to trade with only $100, $500, or even $1000. The answer is LEVERAGE! Think of your broker as a bank, who essentially gives you $50,000 to buy currencies. All the bank asks from you is that you give $500 as a sort of good faith deposit. This is how LEVERAGE works; it’s the ability to control large amounts of money with a relatively small capital.

NOTE: You don’t PHYSICALLY give your broker $500. It’s shown in your account. If they see you have $500 in your account and you choose a leverage of 1:100 ($500 x 100 = $50,000), they will allow you to open positions worth $50,000. We will discuss this more in the next section.