Have you ever found yourself wanting more returns on your trading positions?
Well, everyone wants a decent return, don’t we?
What if there is a way to make a sizeable profit and boost your trading account immensely, well hold on, I’ll illustrate how!
As a result of the fact that many traders cannot deposit large sums for trading, brokers have come up with the perfect answer, to enable retail traders to make good returns on their investment, whilst having low initial trading capital.
How does this work?
It is like two people who want to meet at a location, how fast can they get there?
Of course, they can meet faster by meeting each other on the way!
By depositing an amount which is known as the margin, the trader takes the first step to start earning high returns, while the broker also meets the trader on the way by providing a higher percentage of the trader’s deposit (leverage).
In this piece, we will take a look at how you can massively boost your trading account with the use of margin.
What is Margin in Simple Terms?
Margin is the amount of money an investor puts down to get a position opened, essentially, it is money borrowed from a broker to trade a financial asset. Margin increases the trader’s exposure to the market in terms of profit and losses.
How Margin Trading Works In Forex
You may wonder why would your broker give you money to trade in a blind trust?
For a trader to use margin, he must first make a good faith deposit into his trading account.
Such deposits will be a percentage of the currency unit as allowed by the broker.
For example, for an account that has a margin requirement of 1%, with an initial deposit of $5,000 you can place trades up to a currency worth $500,000.
You Do Not Need Large Capital to Make Huge Profits
Yes! You heard that right. You can make big profits with not-so-big equity. Almost all brokers offer a minimum margin requirement of 0.5%.
The margin requirement is the percentage of margin required to keep a position open.
An example of margin requirement is 0.25%, 0.5%, 1%, 5% etc. Margin requirement varies according to currency pairs and forex brokers.
Now let’s examine another scenario…
If you have an equity of $100 and you open a trade on a leverage 1:100, this means that for every 100 units of currency in an open position, 1 unit of currency is required as margin.
Also, some forex brokers do not require a minimum deposit amount.
With a deposit of as little as $50, you can be able to trade as much as 2500 units if a 50:1 leverage is used.
Quick Tips to Boost Your Account with Margin Trading
1. Trade with moderate leverage
2. Avoid adding to losing positions
3. Get out on time!
Trade With Moderate Leverage
The use of leverage inevitably comes with advantages and losses. This is because the more leverage a trader uses with his margin.
The lesser the available margin the trader will have to cushion the effects of any losses. The losses a trader will suffer will become more profound if he has overleveraged.
Avoid Adding To Losing Positions
If you are in an unprofitable trade, it is best to not add to such trades with the hope that the market will turn at a certain time in your favor, so you can make up your losses in one fell swoop.
More often than not, the trade may continue in its unfavorable direction thereby making you even more.
Adding to losing positions will reduce your available margin and might even lead- it might even lead to you being margin called or even liquidation in the direst of circumstances.
Get Out On Time!
Have you heard of the saying, quit when the ovation is loudest? This saying can also be applied to margin trading in forex.
If you are in profitable trade that has reached your take profit price, it is best to close the trade or you may trail your stop-loss to your take profit.
Whilst you may make more profit if the trade(s) go further in your favor you will still be in good profit if it does not.
SEE ALSO: The Ultimate Guide To Margin Trading
Trading with margin and use of leverage is a good means to earn large profits and boost your trading equity.
With the use of leverage on a margin account, it is possible to turn a $200 balance into $20, 000 or even more.
But it should be known that while it is quite possible to earn large profits from margin trading.
It is possible to also lose so much as your exposure to market forces could have a significant effect on your trading balance.
It is advised that traders should use quality risks management practices, understand the nuances of trading, and use smart trading strategies.
Forex trading is a very profitable business but should not be taken as a get-rich-quick scheme.
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