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Margin isn’t a down payment for a transaction. The margin is more a guarantee of security against trading losses. Thanks to margin requirements, traders can hold positions that are much bigger than their available account balance.
Margin is simply set aside for the duration of individual trades and is approximately 0.5% of the trading volume for new accounts. For example, in a euro Mini account, this corresponds to EUR 50 per lot of trading volume for the EUR/USD currency pair. Margin requirements vary between individual currency pairs and account currencies, and may change slightly from time to time. To ensure that traders are always aware of current margin requirements they can be viewed in the FXCM trading account.
An Example of How Margin Works: |
When a trader opens a position of 40 lots (400K) in the EUR/USD currency pair, the required margin is EUR 2,000, which will be displayed in the FX Trading Station Accounts window in the Used Margin column (abbreviated “Usd Mr”). |
If account equity - the account balance including all open positions - falls below the mandatory margin requirement due to open trading losses, all open positions are closed out automatically at the market price. This is called a margin call and it prevents customer accounts from falling into negative balances.
*Without proper risk management this high leverage can lead to both positive and negative results.
