What's Margin Trading?

What is Margin Trading Account?

The meaning of Trading Leverage is having the ability to control a big amount of money using very little of your own money and borrowing the rest - this is what makes the market to attract many traders.

We shall explain leverage first and then explain margin in this learning how to calculate leverage & indices margin course.

Example:

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

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

To put in another way your online broker gives you $100 for every one dollar in your account. This is what is known as leverage.

This means that if you open an account with $1,000 and your leverage option is 100:1, then you get $100 for every $1 which you have in your trading account, the total sum which you'll 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

Now you control $100,000 of Investment

Most new traders ask what leverage is best leverage for $1,000, or $2,000, or $5,000 dollars account? - The best leverage option to choose 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 amount borrowed.

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

Now can you compare a investor investing $1,000 with another one that is investing $100,000? Obviously Not. This is how it works: it takes you from that retail investor investing $1,000 to that investing $100,000. Where does this extra money originate from? - You borrow it from your online broker in what's simply referred to as Leverage. This equity that you as a trader borrow, you borrow it against the $1,000 of your equity that you as a trader deposit with your online 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 leverage option but you would not make money & it would take too long to make any profit.

Example of how to calculate leverage & indices margin:

Margin required in this case is $1,000 (your money) if it is expressed as a percent of $100,000 which you control it is:

If leverage = 100:1

1,000 / 100,000 * 100= 1%

Margin required = 1%

(1/100 *100= 1%)

'Trade FX Trading - Please simplify because I am Beginner'

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

What is Margin Account? - What is Margin Trading? - How to Calculate Indices Trading Margin - Indices Margin Calculation - What is Margin Account? - What is Free Trading Margin Level in Indices Trading? - What is Used Indices Trading Margin Level in Indices Trading? - What is Margin in Indices Trading?