Forex Margin Trading – The Dangers Of Trading On The Margin

Why is gaining an excessive amount of leverage through forex margin trading a dangerous thing?
If you have already read about the concept of leverage in forex by trading on the margin, you will no doubt understand that it’s rather a powerful tool. An average margined account will offer a 1% margin, therefore you simply deposit 1% of the full total value of your trades (together with your broker lending you the other 99%).
Lets say your account deals in a large amount $100,000 each, in order to buy a lot you now only need to invest $1000 of your own money in that trade (1%). Now this deal may seem like an amazing offer, also it does permit the ‘average joe’ to have a little bit of the action without needing a couple of hundred thousand dollars to spare. However, there is one big caveat you mustn’t overlook:
Trading on a margin of 1% means a fall of 1% of your trade will put you from the game!
Forex margin trading lets you minimise your financial risk, however the flip side of the coin is that if the value of one’s trade dropped by the $1000 you submit it could be automatically closed out by the broker. This is called a ‘margin call’.
As you can see, a little movement in the incorrect direction could easily get rid of your trade, and see your $1000 gone in a couple of seconds. If the trade moved enough in the proper direction to cover the spread then you might make a good profit, but you would need to be absolutely certain in your prediction to create such a risky trade.

Forex margin trading on a 1% margin is risky business, but by getting the balance right between your degree of risk and how heavily leveraged you account is it is possible to gain an advantage. This advantage could be the difference between success and failure.
Important: Gaining An Advantage in Forex Margin Trading is key to Your Sucess!
Learn more about forex currency trading strategies [] and margins, and know the pitfalls the brokers try to hide!