To make an agreement with the broker you must open an account either at broker’s or at a bank. How much money do you need for that? To get clear with this issue let us see what Margin is - the most important notion that is the base not only of the money but also any other market.
The creditor for us is the broker and it is he who determines the rules of the game. It is turned out that transactions are carried out with the standard lots which value constitutes 100 thousands and 1 million units of the currency being sold when the broker gives a leverage of 50, 100, 200.
The more leverage is the more lots you can throw to the market, the more profit correspondingly you can get. But the possible expenses are as many times bigger therefore, when there is bigger leverage the risks are increasing.
Let us continue this topic further. It is not convenient every time while opening the position to put Margin on the broker’s account, when shutting - to take away. It is not necessary. Every broker has the certain minimum level of the trade account, normally the sizes of which are from one thousand dollars to ten thousand dollars and some brokers have from 100 000 USA dollars. Before start to trade you should put on your trade account the sum not less than that indicated in the agreement as minimum. And may it be even more? Of course it is just needed. Why?
Let us see that according to the conditions of the broker the minimum lot is 100 000 dollars, the leverage is 100 and that’s why the Margin needed is 1000 dollars. Exactly this sum you are putting on the account. After you have opened the position depending on the direction of the price circulation (rate exchange) there will be losses or profit. With the profit there is no problem but with the losses. If you decide to shut the position the loss will be write away from your account and then again to enter the market you will have to add money up to 1000 dollars. It is not convenient even technically - till you will look for money, put on account - you will lose the wonderful market circulations and correspondingly the opportunity to earn money.
But there are even more important things. But first let us sort out with such an important notion as Equity or flying deposit. Let us suppose that you have a deposit the value of which is 1000 dollars. After opening the position the price is coming on the desirable for you side and there is a profit coming according to the position let us say about 105 dollars. Summing up the profit with your deposit we will get 1105 dollars. It may happen that there is a loss like the same 105 dollars but with the minus and then the equity will be 895 dollars. Equity is a completely real thing, it is the cost of your deposit this very second, and of such a size you will have a deposit if you will immediately shut all the positions. It is obvious that if there are no open positions equity is zero.
It is vital to gather as much information about Forex as possible. Because this knowledge will help you not to lose much money on Forex trading or Forex investment.
Surely not a single piece of knowledge can be rock solid guarantee against losses, in particular on Forex market, but sometimes just one Forex book can be of big service to you.
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