Many wise investors now choose to take part in FX margin trading
. With this form of trading you can have access to a much larger amount of money than what you hold in your account. This is what is termed leverage.
At first, many people don't understand the concept. But it is successful as the currencies on which the trades are based do not often alter in value by more than a percentage point over the course of a few days. Even with just a deposit of a few hundred dollars a brokerage firm will lend you enough to conduct worthwhile FX margin trading.
The actual amount that a broker is willing to lend to you can vary greatly between companies. It will depend upon the conditions and terms set out in your contract. Usually most will be happy to give you an amount that is around fifty times your account balance, but there are a few firms that can lend traders as much as 200 times their holdings.
At first glance you may think this is a wonderful scheme, but even though there is the potential to earn vast profits there is always the risk of creating a loss and getting into debt.
Many traders have made vast gains through FX margin trading. It is a very simple way to get involved with the foreign currency markets. Most investors do not have hundreds of thousands of dollars of their own that they are willing to trade with when they first begin. FX margin trading allows such people to make deals and profits without having to use their own cash.
Of course there are systems that are built in that protect the trader from incurring massive losses. Today all Forex trading is carried out by electronic means; the software used will have been designed in such a way to prevent any trader from carrying out deals if their funds drop below a specific level.