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Forex Margin Requirements


Forex Trading Tips for BeginnersEverything you need to Know about Forex Margin Requirements Before Starting to Trade


Are you about to start trading in Forex? If so, you're certainly planning to use leverage to multiply your profits. But in order to use leverage, you'll have to know about Forex margin requirements.

Currency pairs will each have specific Forex margin requirements, and these are related to regulatory decisions, as well as expectations from the market.

Let’s take a look at what exactly Forex margin requirements are, and how they will affect you.


What are Forex margin requirements? 

Forex margin requirements go hand in hand with leverage. When you use leverage, you are essentially trading on values that far exceed what you're actually depositing. The “margin” refers to the actual deposit.

Forex margin requirements, therefore determine what you have to deposit in order to trade. For example, a margin requirement of 1:50 implies that you have to deposit 2% of the value of the trade.


Why Forex specifically? 

Margin requirements are much more pertinent to Forex trading, because of the high leverage that is available. Whereas with stocks, you may be able to trade at 1:2, with Forex you can sometimes trade at 1:500.

This is what makes it so easy to get involved in Forex trading. You don’t need the big bucks to get started.


Are all Forex margin requirements equal? 

No, Forex margin requirements differ widely, depending on the amount you're trading, the currencies you're trading, and the regulatory bodies involved.

So, with smaller amounts, you may get leverage of up to 1:500, whereas with large amounts, you'll get 1:50.

Also, actions by the Swiss bank raised margin requirements on pairings with the CHF to 1:20, and with the AUD or JPY to 1:33.


The inherent risk 

Just because what you deposit (i.e. the margin requirement) is relatively small, does not mean that you cannot lose big. When trading on leverage, you're up to lose as much as you can make. Your deposit can be seen as representative of a bigger amount, rather than as the amount you're putting into the pool.


What does this mean to me? 

Forex margin requirements will help you determine if you can afford the trade. If you do not have the money to make the margin payment, you cannot trade (and you should not even be considering it). Furthermore, you need to make the calculations to determine how much you stand to lose. Again, if you are risking more than you are able to lose, you should reconsider making the trade in the first place.


When you're starting to trade in Forex, you'll need to have a good grasp of these concepts. Forex margin requirements are going to play a big part in all of your trade decisions. Make all the necessary calculations and, once you've got the numbers down, be responsible.



Beginners in Forex trading

Forex Trading Tips for BeginnersWhat do you need to know as a beginner in Forex trading?

Are you a beginner in Forex trading? If so, you're probably wondering where to start. It might look like there’s a lot to know, but you can learn the basics without too much stress. Here is a beginner’s guide to some of the things a beginner in Forex trading needs to know.

This is not a get-rich-quick scheme

This is the first thing you absolutely need to know. Forex trading involves careful investing and a lot of patience. If you're expecting to hit the jackpot from the start, you're in the wrong game.

The retail trading foodchain

You need to know how the industry is mapped out. It is a combination of all participants that creates the market, but their weight is measured by how much money is managed by a particular party.

Long-term deals are safer

One unrealistic expectation that every new trader needs to avoid is that s/he will profit from the start. When you're a beginner, your objective should be minimising risks and preserving your capital. Long-term trades will be safer for you, as you can maintain a relative balance until you know enough to make money.

Avoid paying for software

Some of the best Forex trading software is available for free, with charges instead coming from a fraction of what you trade. You may have heard of Forex robots or Expert Advisors (EA), but even though they can be helpful, they have a hard time keeping up with changing markets.

Long-term trading requires patience

When you start trading in Forex, you're excited about the possibilities, but you must remember that Forex works because it’s an investment, not a lottery. You may need to hold orders open for weeks, months, or years, so learn patience and think in terms of the bigger picture.

Learn technical and fundamental analysis

Not long ago, this rule wouldn't have to have been stated. Analysis is absolutely vital to trading. Unfortunately, Forex is being increasingly sold as an effortless get-rich-quick scheme. That is not the case. You need to learn how to interpret charts, trend-lines, indicators, etc. When you make the effort, you'll find it’s not a lot to learn, but you will need to know it.

Keep it simple

Remember that you're a beginner, and don’t put too high expectations on yourself. If you overload your charts with indicators and your strategy with handles and switches, you'll get lost in the complexities, and probably drop out early on.

Pay attention to instrument portfolios, execution models, and the leverage offered...

Instead of the minimum deposits and tight spreads that are advertised with trading accounts. There is no perfect trading platform, but be cautious of Dealing Desk accounts unless you are specifically interested in the conditions they offer.

Be careful on volatile markets

Although volatility is the bread and butter of Forex trading, it is also where most money is lost.

Stick to the trends

Maybe you have the right idea about the value of the US dollar. That doesn’t mean it’s going to be traded that way. Stick to the trends, even if you think the trends are wrong.

There are hundreds of markets available

Not just the major currency pairs you may know about. Do some investigating into what else there is on offer.

Keep a journal

A trading journal is an absolute must. When you are entering into Forex for the first time, your goal is to learn as much as possible. You can only do this by keeping track of your thinking, actions, and mistakes.

Stay calm

Psychology is one of the most important factors in Forex trading. You'll be tempted to treat the market like a slot machine at times and just go for broke. Learn how to manage those urges, and you can stay in it for the long term.

Only use risk capital

You must never use money to trade that you can’t afford to lose. By doing so, you are setting yourself up for failure, as you will panic and make mistakes when things start going wrong. Forex should not be a gamble.

This is only the start of your Forex education. There is plenty more to learn out there and, most importantly, along the way.

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