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There are two major components to becoming a successful forex trader.
The first is what we are all aware of: you need to be able to read and understand the forex market.
The second is just as important, and often is the difference between FX traders who consistently make money, and those who don’t: risk management.
So, it’s really important to know what your risks are when trading the forex markets. And one of the things about margin trading is that it magnifies risk. It, of course, also magnifies profit, which is the reason people use it.
In fact, the point of trading on margin is to magnify the effects of things.
What is Margin Trading?
Simply put, margin trading is when you borrow money from your forex broker to invest in the markets.
Usually you will put up a percentage of the money yourself, and the rest will be supplied by the broker. 1:10 margin means that for every $1 you put up, the broker loans you $9 so that you can enter $10 in trades.
The first risk here is pre...
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