If you don't know where to start, start here! Don't be afraid to ask questions.
5 posts • Page 1 of 1
- rank: 10000+ posts
- Posts: 12707
- Joined: Sun May 14, 2006 9:31 pm
- Reputation: 991
- Location: Oregon
- Real name: Avery T. Horton, Jr.
brwkem wrote:One mini lot is 10k so does that mean that if you buy one minilot then you wouldnt be using any margin? Assuming your account had 10k in it.
Any time you take a position (buy or sell) your broker will require that you put up margin for the transaction. Technically margin isn't required to intiate a transaction but as not all traders make a profit a margin is the Brokers insurance incase things go bad.
In your example above if you bought (or sold) $10K worth of currency and your leverage at your Broker was 100:1 then you would have to put up $100 margin to cover the transaction. Now if the price goes up (if you are long) $100 you have made 100% against the margin used for that trasnaction. Conversely if it went down by $100 then you have lost 100% of the margin put. This is the double edge sword and power of leverage.