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 can be a powerful tool. An average margined account will offer a 1% margin, therefore you only have to deposit 1% of the full total value of your trades (with your broker lending you another 99%).
Lets say your account deals in a large amount $100,000 each, in order to buy a lot you now only need to invest $1000 of your money in that trade (1%). Now this deal may seem like an amazing offer, and it does allow the ‘average joe’ to obtain a little bit of the action without needing a few hundred thousand dollars to spare. However, there is one big caveat you mustn’t overlook:

Trading on a margin of 1% means a fall of 1% of your trade will put you 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 put forward it might be automatically closed out by the broker. This is called a ‘margin call’.
As you can see, a small movement in the incorrect direction could easily get rid of your trade, and see your $1000 gone in a few seconds. If the trade moved enough in the right direction to cover the spread then you might make a good profit, but you would need to be sure in your prediction to create 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 it is possible to gain an advantage. This advantage may be the difference between success and failure.
Important: Gaining AN EDGE in Forex Margin Trading is Vital to Your Sucess!
Learn more about forex trading strategies [] and margins, and know the pitfalls the brokers try to hide!