How does margin trading in the foreign exchange market happen?
- 6월 21, 2017
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How does margin trading in the foreign exchange market happen?
When an investor uses a margin account, investors are inherently borrowing to increase their return on investment.
Often investors use margin accounts when they want to invest in stocks using leverage of borrowed money to control positions that are bigger than what they can control with their investment capital.
This margin account is operated by an investor's broker and is settled daily in cash. However, margin accounts are not limited to stocks but are also used by currency traders in foreign exchange markets.
Often investors use margin accounts when they want to invest in stocks using leverage of borrowed money to control positions that are bigger than what they can control with their investment capital.
This margin account is operated by an investor's broker and is settled daily in cash. However, margin accounts are not limited to stocks but are also used by currency traders in foreign exchange markets.
Investors who want to trade in the foreign exchange market must first join a regular broker or an online foreign exchange discount broker.
If the investor finds the right broker, you need to set up a margin account. Foreign exchange margin accounts are very similar to stock margin accounts. That is, investors receive short-term loans from brokers. The loan is equal to the amount of leverage the investor is performing.
Investors must first deposit money into the margin account before making a transaction. The amount to be invested depends on the percentage of margin agreed upon between the investor and the intermediary. Margin rates are typically between 1% and 2% for accounts that will trade in 100,000 currency units or more.
Therefore, for investors who want to trade $ 100,000, a 1% margin means that $ 1,000 must be deposited into the account. The remaining 99% is provided by the broker.
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