MARGIN TRADING

Trading on margin means that an investor can buy and sell assets that represent more value than the capital in their account.

Without proper risk management, this high degree of leverage can lead to large losses as well as gains. Trading Forex on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in Forex you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. Currency trading is not conducted on a regulated exchange, and as a result there are associated risks with forex trading. You should be aware of all the risks associated with Forex trading, and seek advice from an independent financial advisor if you have any doubts.

The most enticing aspect of trading currencies is the high degree of leverage used. Leverage seems very attractive to those who are expecting to turn small amounts of money into large amounts in short period of time. However, leverage is a double-edged sword. Just because one lot ($100,000) of currency only requires $1,000 as a minimum margin deposit (100:1), it does not mean that a trader with $10,000 in his account should easily be able to trade 10 lots or even 5 lots. One lot is $100,000 and should be treated as a $100,000 investment and not the $1,000 put up as margin. Most traders analyze the charts and data correctly and place sensible trades, yet they tend to over leverage themselves (take a position that is too big for their portfolio), and as a consequence, often end up forced to exit a position at the wrong time (margin call). Please check with your Forex Counter Party and/or Client Agreement to see what their specific requirements are concerning margin and all circumstance in which you could receive a “margin call” or a closing of your position which may result in a loss of the capital in your account.

NOTE: Trading Forex on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in Forex you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Forex trading, and seek advice from an independent financial advisor if you have any doubts.