What is Margin ?
It may be easier to understand if you think of the margin as a deposit for the trade that you
want to open and maintain. The broker that you’re trading with will keep a portion of your
balance to cover the potential loss of that trade. Once you close the position, the margin will
be put back into your account.
The margin that you need for a trade is normally expressed as a percentage of the whole trade
and is called the ‘Margin requirement’. You’ll be given a margin requirement for every trade
that you open, and it will vary depending on the instrument that you trade and the broker that
you choose to trade with.
What is leverage?
Theoretically speaking, leverage refers to the fact that traders have a large amount of
disposable funds while using a small amount of their own funds. They can borrow the rest from
For example, if you trade with 1:100 leverage and you have $1000 in your account, you have
$100000 to trade. While this sounds like a great opportunity, you must always remember that it's
a double-edged sword.
When you trade at a larger amount, you can open a larger position and possibly make a larger
profit due to leverage. However, the larger your position, the higher your risk and the greater