When trading on margin, traders essentially use borrowed funds from their broker to control larger positions. The broker will issue a margin call if the market moves against a trader\u2019s position and the account balance approaches the maintenance margin. Margin is a fundamental concept in forex trading that allows traders to control substantial positions with a relatively small investment. It acts as collateral provided to a broker to open and maintain trades. Unlike a fee or cost, margin is a portion of your account balance temporarily set aside by the broker to cover potential losses. Understanding what is margin in forex is essential for navigating the complexities of leveraged trading and managing risks effectively.<\/p>\n

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• Failure to meet the margin call can result in the broker closing the position to limit further losses.<\/li>\n
• The free margin is calculated by subtracting the margin used for open positions from the total equity (balance + or \u2013 any profit or loss from open positions).<\/li>\n
• Many forex brokers require a minimum maintenance margin level of 100%.<\/li>\n
• The margin call level for CFDs varies from broker to broker but always occurs before a stop out is implemented.<\/li>\n
• Our goal is to help empower you with the knowledge you need to trade in the markets effectively.<\/li>\n
• Also, remember that a trading plan can be adjusted as you gain more experience and are better able to master margin and leverage.<\/li>\n<\/ul>\n

  What is leverage in forex trading and how does it work?<\/h2>\n

  Join over 42,000 traders and get FREE access to 17 lessons and 5 hours of on-demand video based on the famous \u2018Market Wizards\u2019. It\u2019s far more sensible to just use the \u2018lending power\u2019 you need at the time, to keep your risk to a minimum and reduce your financial exposure. If you take no action when you receive a margin call, some or all of your position will be liquidated, and you\u2019ll have no choice about the point at which you exit your trade. It means you only need to pay a small percentage of the full value of the position to open a trade.<\/p>\n

  Commissions are another common cost, particularly for ECN and raw spread account types. Brokers charge a fixed fee per lot traded, and with high-leverage trading, the potential for frequent transactions can lead to higher overall commission expenses. For example, traders using high leverage often open and close multiple positions within a short time frame, which increases the cumulative commission costs.<\/p>\n