Till now, we all know what forex is, that is the exchange of currencies or also commonly called “FX”. Let us understand the importance of important forex marketing components as mentioned. If we are trading in the forex market, we all should know until now that what forex margin and forex leverage mean. Let us explain it to you before you actually start trading.
Margin is a new concept 
in foreign trading and it is often misunderstood by many forex traders. To elaborate, every trader demands/wishes to hold a good position value of his own in the market and here is when the concept of margin comes into the picture. Margin is a good faith deposit that a trader puts up in the trading market. Margin is often considered as the transaction cost whereas it is a portion of your account equity. The trading size decides the amount of margin required to open a position in the market by the trader. Therefore it is understood that as the trade size will increase, the margin will also increase.
Leverage, helps the trader control it’s larger trade sizes, therefore, it is often called as the by-product of margin. It is very useful for the traders to use it as a measuring tool while trading currencies in the forex market. In short, it helps traders to manage their returns.
Effects of Leverage
The trader’s accounts can be extremely affected if the leverage is not used properly. For example, the traders are trading larger lot sizes with the use of leverage then the gains can be affected and the prices fetched can turn bearish. But if the trader trades smaller sizes initially, depending upon the market scenario then the prices can be bullish. Therefore this means that leverage has to be used significantly and with proper trading knowledge in order to avoid losses. It is not necessary that using leverage will always give positive trade results, the trade can also move against you.
What is margin call in forex?
“Never meet a margin call. You are on the wrong side of the market. Why send good money after bad? Keep the money for another day,” Jesse Livermore.
As Margin and Leverage are two sides of the same coin, they both help you control an amount larger than your account balance. Now, you will understand what a margin call is. The margin call is basically setting up a margin before you start trading so that you know the amount traded to the amount gained with the two currency pairs. Margin calls should usually be avoided for trading potentially.
We have all tackled with trading issues; therefore this topic is of utmost importance while trading. To open a position with a broker, hotforex is highly recommended. Therefore, based on the margin required by your broker, you can calculate the maximum leverage you can wield with your trading account.
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