Any broker will likely have a minimum account size, known as forex account margins or initial margin available to traders. When you deposited money into the account you will be able to begin trading. The broker will stipulate how much equity they require per position, or traded, lot. Always make sure that you know how your forex account margin is going to work.

You need to read the margin agreement between you and your firm carefully. A forex margin account is mostly a loan. The margin agreement will describe how the interest on that load is calculated, how you are responsible for repaying the load, and how the securities you purchase will serve as security for the load. Review the agreement carefully to determine what notice, if any, your firm will give you before selling your securities to collect the money you have borrowed.

Trading currencies on margin greatly increases your buying power. If you have $ 5000 cash in a forex margin account that allows 100: 1 leverage, you could buy up to $ 500000 currency worth because you have to post 1% of the purchase price as security. This is particularly useful in the forex market, where traders work with small price changes to realize profits.

If the market starts against you, the positions that you have in your account could be partially or completely liquidated if the available margin in your account falls below your maintenance level. You need to remember your broker may not be required to make a margin call, even if your agreement states that they do not wait for you to respond to the call. So you should monitor your own margin balance on a regular basis and utilize stop-loss orders on every open position to limit risk. Forex account margins make the forex market work for small traders.

Source by Choy Ky