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 concept of leverage in forex by trading on the margin, you’ll no doubt understand that it’s rather a powerful tool. A typical margined account will offer a 1% margin, which means you simply deposit 1% of the total value of your trades (together 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 own money in that trade (1%). Now this deal might seem like an amazing offer, and it does permit the ‘average joe’ to have a little bit of the action without needing a couple of hundred thousand dollars to spare. However, there’s one big caveat you mustn’t overlook:
Trading on a margin of 1% means a fall of 1% of one’s trade will put you out of the game!
Forex margin trading allows you to minimise your financial risk, but the flip side of the coin is that if the value of one’s trade dropped by the $1000 you submit it will be automatically closed out by the broker. This is called a ‘margin call’.
As you can see, a little movement in the wrong direction could easily wipe out your trade, and see your $1000 gone in a couple of seconds. If the trade moved enough in the right direction to cover the spread then you could make a good profit, but you would need to be absolutely certain in your prediction to make such a risky trade.
Forex margin trading on a 1% margin is risky business, but by obtaining the balance right between your level of risk and how heavily leveraged you account is you can gain an edge. This advantage may be the difference between success and failure.

Important: Gaining AN EDGE in Forex Margin Trading is key to Your Sucess!
Learn more about forex trading strategies [] and margins, and know the pitfalls the brokers make an effort to hide!

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