Leverage

When opting for a leverage, make sure you know what margin requirement is set for it. Different Forex brokers may have different margin requirements for the same 1:100 leverage.
It is important to understand the meaning of both terms before trading live.

Leverage - the ratio of investment to actual value. A leverage of 1:100 means a trader can buy a Forex contract of $1000 by paying $10.

Before allowing a new trade, the system checks that a trader has a minimum deposit required to open a new contract. If there is not enough funds (real funds including current floating losses and profits) to open a new contract, the platform won't allow any new trades, except for closing existing ones.

When a new trade is open it reflects in Used Margin column.
Used Margin - the deposit temporarily withdrawn from/blocked on the client account as collateral to cover any losses which may occur as a result of trading. When a trade is closed, it is returned back.

The rest is Available Margin.
Available Margin - limits the size of positions a trader can open and will affect when a trader is going to receive a margin call.

When your floating account balance (final balance after adding all floating profits and deducting all floating losses as per current minute) becomes equal to Used Margin due to recent losses, a Margin Call is received - brokers' trading platform begins to liquidate all (or few) running trading positions to ensure that you don't spend more than you have invested.

Also note, that majority of Forex brokers provide traders with huge demo accounts of $50 000, where noticing any significant influence of "leverage-margin" effect is difficult unless you set a goal to do so. Large demo account offers plenty of funds, which will keep all worries away for a long time; hopefully long enough for a trader to believe in his/her trading success and consider live Forex trading. Our advice is, if possible, look for a demo account of $1000-5000 or so, where you'll be able to feel and trace the working mechanism of leverage and margin.


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