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Comments on Forex Trading Account Sizes, Lots and Margin Calls.

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Forex trading is one of the best business opportunities you canthink of joining these days. No other market in the world allowsthe "Leverage" that the profitable world of currency-tradingdoes. Leverage is all about margin trading. In the Forex market,it is essentially the ratio of the amount used in a trade to therequired security deposit needed, by the particular broker youchose to use, for that trade. Normally, for most brokerages, a margin deposit of just $1,000allows you to control a $100,000 position in the Forex market.That's 100:1 leverage, or 1%. Or, said in a different way, a"regular full-sized account", sometimes referred to as a 100kaccount, allows you to trade with lot sizes equal to $100,000.Each lot is worth $100,000 in currency. So It would only require$1,000 to trade one lot. This great feature in Forex trading is what makes this marketthe hottest market to trade in right now. The Forex broker hasgiven you a loan of $99,000 dollars secured only by your $1,000!This is a huge loan and, as you may know by now, this is whatallows traders to make extraordinary incomes in this market.And, as you also are probably used to hearing , "leverage is atwo-edged sword" , it is what can cause you to lose a lot ofmoney if you trade without rules or Stop-loss orders. But just as an example, let's say you were a person that likesto trade with reckless abandon, i.e., with no strategy, nocommon sense, no money- management principles, etc. That's neverrecommended

for anyone, but being a Forex trader has such greatadvantages, that even someone with a trading mind like the onedescribed before, will never lose more than what he has placedinto a trade. Unlike Futures (Commodity Trading), the market that most peopleassociate with High leverage, you can never have a debit balancewhen trading Forex. So, despite the greater leverage associated with FX trading, itis still arguably less risky than futures trading. Futuresmarkets are often prone to sudden and dramatic moves, againstwhich you can't protect yourself, even by trading withprotective stops. Your position may be liquidated at a loss, andyou'll be liable for any resulting deficit in the account. Butbecause of the Forex markets great liquidity and 24-hour,continuous trading, dangerous trading gaps and limit moves arevery unprobable. Orders are executed quickly, without slippageor partial fills, which is just great. And as it was not enough, there are no margin calls, for yourprotection, the forex broker's trading platform willautomatically close out some or all of your open positions ifyour account equity, meaning the total floating value of theaccount, falls below the level required to hold the positions.Think of this as a final, automatic stop, always working on yourbehalf to prevent a debit balance. About the author: Adrian Pablo; Forex trader and freelance writer. You can download a free Fibonacci trading report at his website: http://www.1-forex.com

Written by: Adrian Pablo

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