Understanding the Concept Of Balance And Margin In Forex

Before starting to trade Forex on a real-money account, it is essential to understand the meanings of fundamentals such as equity, margin, free margin, and balance sheet.

Forex has a relatively slow initial learning curve due to the many concepts that need to be memorized. After this first phase, everything becomes more straightforward and learning faster. The first time you log into your trading account, you may be taken aback by the fact that you find other financial information that changes permanently alongside your initial balance. How come these parameters vary? And above all, what do they mean? Let’s find out together.

Balance

When you have no open position, the balance – or balance – equals the money deposited into your trading account. For example, if you have stored € 100 and have not yet traded, your balance is € 100.

When you trade and have several open positions, the balance corresponds to the remaining capital. It does not undergo any variation as your cross-fluctuation changes. It updates the moment you close a place.

On the MetaTrader platform, the balance is called a balance.

Margin

Margin, together with leverage, is a concept as important as it is complex, which is worth investigating. Margin level is (ระดับmargin margin level คือ which is the term in Thai) the amount requested by the broker to open a position. Whenever you open a long or short position, you need to have that amount of margin required. It is calculated using volume, expressed in batches, and leverage.

Some examples on Margin

If you want to buy one micro lot of 1,000 EUR / USD units and your EUR account has a leverage of 100: 1, the broker will ask you to have 1/100 of € 1,000 available to open a position, i.e., a margin of € 10.

If, for example, you want to buy one mini lot of 10,000 units of EUR / USD and your account in EUR has a leverage of 50: 1, you will have to make available 1/50 of € 10,000 to open a position or a margin of € 200.

Leave a Reply

Your email address will not be published.