What are the advantages of the Forex Market over other types of investments? When thinking about various investments, there is one investment vehicle that comes to mind. The Forex or Foreign Currency Market has many advantages over other types of investments. The Forex market is open 24 hrs a day, unlike the regular stock markets. Most investments require a substantial amount of capital before...

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

Adrian Pablo

Forex trading is one of the best business opportunities you can think of joining these days. No other market in the world allows the "Leverage" that the profitable world of currency-trading does. Leverage is all about margin trading. In the Forex market, it is essentially the ratio of the amount used in a trade to the required security deposit needed, by the particular broker you chose to use, for that trade.

Normally, for most brokerages, a margin deposit of just $1,000 allows 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 100k account, 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 market the hottest market to trade in right now. The Forex broker has given 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 what allows traders to make extraordinary incomes in this market. And, as you also are probably used to hearing , "leverage is a two-edged sword" , it is what can cause you to lose a lot of money if you trade without rules or Stop-loss orders.

But just as an example, let's say you were a person that likes to trade with reckless abandon, i.e., with no strategy, no common sense, no money- management principles, etc. That's never recommended for anyone, but being a Forex trader has such great advantages, that even someone with a trading mind like the one described before, will never lose more than what he has placed into a trade.

Unlike Futures (Commodity Trading), the market that most people associate with High leverage, you can never have a debit balance when trading Forex.

So, despite the greater leverage associated with FX trading, it is still arguably less risky than futures trading. Futures markets are often prone to sudden and dramatic moves, against which you can't protect yourself, even by trading with protective stops. Your position may be liquidated at a loss, and you'll be liable for any resulting deficit in the account. But because of the Forex markets great liquidity and 24-hour, continuous trading, dangerous trading gaps and limit moves are very unprobable. Orders are executed quickly, without slippage or partial fills, which is just great.

And as it was not enough, there are no margin calls, for your protection, the forex broker's trading platform will automatically close out some or all of your open positions if your account equity, meaning the total floating value of the account, falls below the level required to hold the positions. Think of this as a final, automatic stop, always working on your behalf 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

The latest information and news on Forex:

forex - Google News

FOREX-US dollar slides broadly on easing growth fears - FOXBusiness

msnbc.com
FOREX-US dollar slides broadly on easing growth fears
FOXBusiness
NEW YORK (Reuters) - The dollar slipped againstmajor currencies Thursday as better-than-expected US dataon housing ...
FOREX-Euro edges up; market cautious before TrichetReuters
FOREX: Bond auctions boost euro currency trading?iF...
WORLD FOREX: Dollar Up Vs Yen; May Drop Depending On Jobs Data - MarketWatch

WORLD FOREX: Dollar Up Vs Yen; May Drop Depending On Jobs Data
MarketWatch
TOKYO (MarketWatch) -- The dollar rose slightly against the yen in Asia Friday as stable Japanese share prices prompted hedge funds to ...

and more »
CFTC Decision On Retail Forex Trading Effective As Of October 18, 2010 - Dail...

CFTC Decision On Retail Forex Trading Effective As Of October 18, 2010
Daily Markets
After months of speculation, the CFTC finally released the rules regarding retail foreign exchange (Forex) transactions. The rules implement provisions of ...
New CFTC Forex Trading Rules Call For 50:1 LeverageForbes (...
FOREX-Dollar on defensive after data whets risk appetite - Reuters

Corporate FX
FOREX-Dollar on defensive after data whets risk appetite
Reuters
TOKYO, Sept 2 (Reuters) - The dollar was on the defensive on Thursday, retaining most of the losses sustained the previous day when upbeat ...
Dollar defensive after trading lower on risk appetiteCorporate FX

all 19 news articl...
EUR/USD: (1.2825) Pair currently above 1.2780 - Forexrazor

EUR/USD: (1.2825) Pair currently above 1.2780
Forexrazor
High-Risk Warning Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work ...

and more »
foreign exchange - Google News

Japan, Indonesia, China, India: Asia Bond, Currency Preview - BusinessWeek

Daily News Corner
Japan, Indonesia, China, India: Asia Bond, Currency Preview
BusinessWeek
Taiwan: The Central Bank of China (Taiwan) will report foreign-exchange reserves data for August. The reserves were $370.1 billion in July. ...
Japan Said to View US Opposition as Yen Intervention ObstacleBloomber...
Trading In Emerging/Exotic Currencies Increases - FavStocks (blog)

Globe and Mail
Trading In Emerging/Exotic Currencies Increases
FavStocks (blog)
The Bank of International Settlements (BIS) has just released the results from its Triennial Central Bank Survey of Foreign Exchange and Derivatives Market ...
A Brave New World In Currencies?Wall Street Journal (blog)
Trend ...
China PBOC Hu Says Developing Econs Face Reserve Asset Losses - IMarketnews.com

Reuters India
China PBOC Hu Says Developing Econs Face Reserve Asset Losses
IMarketnews.com
Hu Xiaolian, a deputy-governor of the People's Bank of China and former director of the State Administration of Foreign Exchange, said that developing ...
Heavy in dollars, China warns of depreciationReuters
C...
Daily Foreign Exchange Market Summary - International Business Times

Daily Foreign Exchange Market Summary
International Business Times
The US dollar continues to weaken against a basket of currencies after mixed economic news. The Labor Department reported new claims for unemployment ...

and more »
CFTC's Retail Currency Rules Back Off Strictest Leverage - Wall Street Journal

CFTC's Retail Currency Rules Back Off Strictest Leverage
Wall Street Journal
That's the same limit voluntarily imposed by some dealer firms already in the US and it's also in line with retail foreign exchange leverage rules in some ...
CFTC Issues New Forex Trading RulesNew York Times (blog...