What is Margin in Forex Trading?

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The margin refer to borrowed money from broker by investor to purchase an investment or to open a trading position. It is difference between entire worth of cash held in trader account and credit amount from broker. In this case, the broker act as creditor and securities held by the investor act as collateral. In forex trade, margin is considered as good faith deposit needed to open a trade and keep it open. In forex trade, there are two types of margin, deposit margin and maintenance margin. An initial cash required to open a trade is called deposit or initial margin, while additional funds required the keep a running trade open is called maintenance margin.

A maintenance margin is required when your open trade position incur a big loss and amount in your account falls below the amount required by the broker to keep a trade position open. In such situation, investor or trader is needed to deposit additional cash into trade account, this additional cash is called maintenance margin.

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