Margin trading (margin trading).

Currently, you can trade on the currency exchange with almost any initial capital, but a trader’s own funds are not always enough to make a significant profit. To increase the volume of transactions and, as a result, profits, margin trading is used.

Margin trading – trading on the stock exchange using margin leverage, which is provided free of charge to broker clients and allows you to significantly increase transaction amounts.

The size of the margin leverage is chosen independently by the trader when opening a new account, ranging from 1:1 (trading only own capital) to 1:2000 (the maximum size depends on the trading conditions of a particular broker).

Features of margin trading.

The essence of margin trading is easiest to understand based on a specific example of exchange trading. For example, you have at your disposal an amount of $100, and by opening a trade of a certain volume you managed to make a profit of $10. In the same case, if you used a margin leverage of 1:10, your income could already be 10 times more, that is, all 100 US dollars.

Margin trading is possible precisely thanks to the provision of leverage , the second digit in the entry of which precisely characterizes how many times the funds available for trading will increase.
 
For example, an indicator of 1:50 indicates that the trader is provided with a margin leverage of 50, and the first one in this entry is equal to the trader’s personal deposit.

If the trader’s deposit is 5,000 conventional units, and the leverage is 1:100, then the amount that can be calculated for investment is 5,000x100=500,000 conventional units. Basic moments.

Advantages – the advantages of this type of trading are simply undeniable; its use allows you to earn much more than the amount of capital initially contributed by the investor.

Disadvantages - the disproportionately large volume of transactions relative to the amount of own funds significantly increases the risk of margin trading, which practically excludes the possibility of working on medium and long time frames.

Collateral – the collateral in margin trading is the investor’s funds; in the event of an unsuccessful transaction, only they suffer, and in no case the broker’s money.

The recommended margin leverage is no more than 1:50; larger sizes are used only for short time periods in the riskiest strategies.