The Importance Of Margin In Forex

Unlike exchange transactions with real supply or real currency exchange market participants forex

, especially those who have little capital used in trade insurance deposit - margin, or so-called leverage (margin trade, or leverage trade).

In margin trading each transaction always has two stages: purchase (sale) of currency at one price and then necessarily sale (purchase) of another currency at the same price (or the same). The first is called "opening position" and the second - "closing the position."

When opening a position to deliver real currency is not apparent, and the client found this position submit an insurance deposit that serves as a compensation for possible losses. After closing the position of the insured deposit shall be returned to the client's account and made an estimate of revenue losses, an operation which is equivalent to the insured deposit.

In this deposit is often a hundred times less than the amount that the client used in this commercial operation.

Here is an illustration of the opening and closing position: For example, predicting increase (appreciation) of the euro against the dollar, ie when the trend / chart of the euro will move up, we want to buy euros at a lower price now and sell them back later when the euro becomes more expensive.

In this case, the operation will look like an open position "buy-buy" of the euro, closing position to "sell-sell". Throughout the long position has been open we have an open position on the euro (EUR / USD). Similarly, you will do when the euro will weaken against the dollar moves down the chart, our operation will be opening position "sell" and closing with "buy".

Thus, when we get to win both lowering and raising the rate for the currency. To play the forex currency market you can only do this through an intermediary in the interbank foreign exchange market. Such a firm may be a financial house or finance broker.

These organizations give you the opportunity to use real time data information agencies of Dow Jones, Telerate, REUTERS and have a separate phone or a computer with the broker channel, giving you quotes of currencies with which you can perform operations.

Even if you're so rich that you can pay for information services agencies, then you'll need an active participant in this market (market maker), which will determine the transaction price.

These quotations will see the screen of your monitor are quotations of the currencies in which you can perform transactions on the real forex. They are constantly changing. So you can not call up a broker and order operation convenient for you price as this price does not suit broker.

As you can see it is not so easy to take into account all specifics of the trading especially if you have to do it yourself in real time. However, you can always purchase a ForexPros forex robot and let it trade for you on the basis of profitable trading strategies coded by professional traders and IT specialists. One category of such automated software I can highly recommend is the so called pre Asian scalpers which do trade on the basis of a geographical pattern which is a sound winning strategy.

by: Forex Reviewer FX

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