When trading, you are only required to put up a small amount of capital to open and maintain a new position. This capital is called the margin.
For example, if you want to buy $1000 worth of USD/EUR, you don’t need to put up the full amount to trade. You only need to put up a small percentage like $300 depending on the amount and conditions set by your broker.
Think of margin as a deposit/collateral needed to open a position.
Account Base Currency
Currency Pair
Account Type
Volume in Lots
Leverage
| Current Conversion Price (EURUSD) |
0:00 |
| Required Margin (EUR) |
0:00Converted Currency |
0:00Account Base Currency |
| Account Base Currency: | USD | Currency Pair: | EUR/USD |
|---|---|---|---|
| Account Type: | Standard | Volume in Lots: | 5 |
| Leverage: | 100 | ||
| Results | |||
| Current Conversion Price (EUR/USD) | 0.97 | ||
| Required Margin (EUR) | |||
| Account Base Currency | 5,000.00 | ||
| Converted Currency | 4857.40 | ||
MARGIN - A ‘GOOD FAITH’ ASSURANCEMargin is often referred to as a “good faith” assurance that you can afford to hold the trade until it is closed. Margin is NOT a fee or a transaction cost of a trade.
It’s simply a portion of the remaining equity that can be set aside from your account. This is to ensure that you can cover the potential loss of trade.
