{"id":9448,"date":"2022-10-11T06:28:26","date_gmt":"2022-10-11T06:28:26","guid":{"rendered":"https:\/\/mdr.foobrdigital.com\/?p=9448"},"modified":"2022-10-11T06:28:26","modified_gmt":"2022-10-11T06:28:26","slug":"what-is-margin-trading","status":"publish","type":"post","link":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/2022\/10\/11\/what-is-margin-trading\/","title":{"rendered":"What is Margin Trading?"},"content":{"rendered":"\n

The biggest appeal that forex trading offers is the ability to trade on margin<\/strong>.<\/p>\n\n\n\n

But for many forex traders, \u201cmargin\u201d is a foreign concept and one that is often misunderstood.<\/p>\n\n\n\n

Like Bob.\"Bob<\/p>\n\n\n\n

Bob sure knows his fried chicken and mashed potatoes but absolutely has no clue about margin and leverage.<\/p>\n\n\n\n

Margin trading gives you the ability to enter into positions larger than your account balance.<\/strong><\/p>\n\n\n\n

With a little bit of cash, you can open a much bigger trade in the\u00a0forex market.<\/p>\n\n\n\n

And then with just a small change in price moving in your favor, you have the possibility of ending up with massively huge profits.<\/p>\n\n\n\n

But for most new traders, because they usually don\u2019t know what they\u2019re doing, that\u2019s not what usually happens.<\/p>\n\n\n\n

More likely, price does move, but it moves against<\/em> them.<\/p>\n\n\n\n

Like what happened to Bob.<\/p>\n\n\n\n

Bob was in a trade.<\/p>\n\n\n\n

He was sure that this trade was going to be a winner so he bet BIG<\/em>.<\/p>\n\n\n\n

All of a sudden, to Bob\u2019s surprise (and shock), he witnessed his trade being automatically closed on his trading platform and ended up suffering an epic loss.<\/p>\n\n\n\n

The funds that now remain in Bob\u2019s account aren\u2019t even enough to open another trade.<\/p>\n\n\n\n

Bob is confused. He asks himself, \u201cWTF just happened?\u201d\"Bob<\/p>\n\n\n\n

He contacts his forex broker and is told that he had been \u201csent a Margin Call<\/strong> and experienced a Stop Out<\/strong>\u201c.<\/p>\n\n\n\n

Bob doesn\u2019t know what the broker is talking about.<\/p>\n\n\n\n

Bob is CLUELESS.<\/p>\n\n\n\n

This is why understanding how margin works is essential.<\/p>\n\n\n\n

A lot of new traders do not understand the concept of margin, how it\u2019s used, how to calculate it, and the significance that it plays in their trading.<\/p>\n\n\n\n

Do you know what margin<\/em> actually is? What about used margin<\/em>?<\/p>\n\n\n\n

What is free margin<\/em>? What is margin level<\/em>? What is a margin call<\/em>? What is a stop out<\/em> or margin closeout<\/em>?<\/p>\n\n\n\n

As you can see, there is A LOT of \u201cmargin jargon<\/strong>\u201d used in forex trading.<\/p>\n\n\n\n

Before you choose a forex broker and begin trading with margin, it\u2019s important to understand what all this margin jargon means.<\/p>\n\n\n\n

If you don\u2019t, it\u2019s almost guaranteed that you will end up like Bob.<\/p>\n\n\n\n

Terrible things will happen to your trading account like a margin call<\/strong> or a stop out<\/strong>. But you won\u2019t even know what<\/em> just happened or even why<\/em> it happened.<\/p>\n\n\n\n

If you really want to understand how margin is used in forex trading, you need to know how your margin trading account really works.<\/p>\n\n\n\n

This starts with understanding what the heck some (really important) numbers you see on your trading platform really mean.<\/p>\n\n\n\n

We\u2019ll call these numbers your margin account\u2019s \u201cmetrics\u201d.<\/p>\n\n\n\n

For example, take a look at the MetaTrader 4, also known as\u00a0MT4, trading platform:<\/p>\n\n\n\n

\"MetaTrader<\/figure>\n\n\n\n

The metrics above are all intertwined<\/em>.<\/p>\n\n\n\n

A change in one causes a change in another.<\/a>As a trader, you need to be aware of the relationships between them<\/strong>\u2026<\/p>\n\n\n\n

BEFORE ever entering a single trade on a live account.<\/p>\n\n\n\n

Don\u2019t be like Bob.<\/p>\n\n\n\n

Where certain metrics fall below a certain value, BAD THINGS will happen!<\/strong><\/p>\n\n\n\n

So you need to know what these metrics are!<\/p>\n\n\n\n

You also need to know what these \u201cbad things\u201d are!<\/p>\n\n\n\n

Make sure you have a solid grasp of how your trading account actually works and how it uses margin.<\/p>\n\n\n\n

So let\u2019s dive right in.<\/p>\n\n\n\n

A margin trading account displays the following metrics:<\/p>\n\n\n\n