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.