Forex Margin Trading – The Dangers Of Trading On The Margin

Why is gaining too much leverage through forex margin trading a dangerous thing?
If you have already read about the idea of leverage in forex by trading on the margin, you’ll no doubt understand that it’s rather a powerful tool. A typical margined account will offer you a 1% margin, therefore you only have to deposit 1% of the total value of one’s trades (together with your broker lending you the other 99%).
Lets say your account deals in lots of $100,000 each, so that you can buy a lot at this point you only need to invest $1000 of your profit that trade (1%). Now this deal may seem like an amazing offer, and it does permit the ‘average joe’ to get a piece of the action without needing a few hundred thousand dollars to spare. However, there is one big caveat you shouldn’t overlook:
Trading on a margin of 1% means a fall of 1% of your trade will put you out 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 your trade dropped by the $1000 you submit it would be automatically closed out by the broker. That is called a ‘margin call’.
As you can see, a little movement in the incorrect direction could easily wipe out your trade, and see your $1000 gone in a few 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 make 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 you can gain an advantage. This advantage may be the difference between success and failure.

Important: Gaining AN EDGE 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!