What's Margin Trading?

What's Margin Account?

The meaning of Leverage is having the ability to control a large amount of money using very little of your own funds & borrowing the rest - this is what makes the market to attract many investors.

We shall explain leverage first & then explain margin in this learn how to calculate leverage & margin lesson.

Example:

We shall us this example to explain what leverage is? If your broker gives you leverage of 100:1 (this is the best option to select as the maximum for any account)

This means you borrow $100 for every dollar you have in your account.

To put in another way your broker gives you $100 for each one dollar in your account. This is what is referred to as leverage.

This means if you open an account with $1,000 & your leverage is 100:1, then you get $100 for every $1 you that you have in your account, the total amount which you will control is:

If for 1 dollar the broker gives you 100

Then if you have 1,000 you will get a total of:

$1,000 * 100 = $100,000 dollars

Now you control 100,000 of Investment

Most new traders ask what leverage is best leverage for $1,000 dollars, or $2,000 dollars, or $5,000 account? - The best leverage option to select when opening a live account is always 100:1 and not 400:1.

What's Indices Margin?

This is the sum of money required by your broker so that to allow you to continue trading with borrowed amount.

In other words the question what is margin in Indices Trading? can be described as the money required to cover open stock trades & is expressed in percentage. For 100:1, the amount you will control is 100,000 dollars as explained in the above examples.

Now can you compare a investor investing $1,000 with another one that's investing $100,000? Obviously Not. This is how it works: it takes you from that retail trader investing $1,000 to that investing $100,000. Where does this extra cash come from? - You borrow it from your broker in what's simply known as Leverage. This money that you borrow, you borrow it against the $1,000 dollar of your own money that you deposit with your broker. If you were to explain what this leverage means - then it is ability to control a large amount of money using very little of your own money and borrowing the rest. Otherwise, if you were trade without this leverage it would not be as profitable as it is, in fact you can still choose not to use leverage, using the 1:1 trading leverage option but you would not make money & it would take too long to make any profit.

Example of how to calculate leverage & margin:

Indices Margin required in this case is 1,000 dollars (your money) if it's expressed as a percentage of 100,000 dollars which you control it is:

If leverage = 100:1

1,000 / 100,000 * 100= 1 percent

Stock Margin required = 1%

(1/100 *100= 1%)

'Trade Forex Trading - Please simplify because I am Beginner Trader'

(Simplify - your capital is $1,000 after leverage you control $100,000 - $1,000 is what percent of $100,000 - it is 1%) that's your margin requirement for your account.

What's Margin Account? - What is Stock Margin Trading? - How to Calculate Margin - Trading Stock Margin Calculator - What is Margin Account? - What is Free Stock Margin Level in Indices Trading? - What's Used Stock Margin Level in Indices Trading? - What's Margin in Indices Trading?