Trading foreign exchange on margin carries a high level of risk, and may not be suitable for everyone. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. Remember, you could sustain a loss of some or all of your initial investment, which means that you should not invest money that you cannot afford to lose. If you have any doubts, it is advisable to seek advice from an independent financial advisor.
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We also offer an IRA Margin account, which allows you to immediately trade on your proceeds of sales rather than waiting for your sale to settle. You can trade assets in multiple currencies and trade limited option spread combinations. IRA margin accounts have certain restrictions compared to regular margin accounts and borrowing is never allowed in an IRA account. Futures trading in an IRA margin account is subject to substantially higher margin requirements than in a non-IRA margin account. Margin rates in an IRA margin account may meet or exceed three times the overnight futures margin requirement imposed in a non-IRA margin account1.
Margin is one of the most important concepts of Forex trading. However, a lot of people don't understand its significance, or simply misunderstand the term. A Forex margin is basically a good faith deposit that is needed to maintain open positions. A margin is not a fee or a transaction cost, but instead, a portion of your account equity set aside and assigned as a margin deposit.
The script is currently hardcoded to generate forex data for the entire month of January 2014. It uses the Python calendar library in order to ascertain business days (although I haven't excluded holidays yet) and then generates a set of files of the form BBBQQQ_YYYYMMDD.csv, where BBBQQQ will be the specified currency pair (e.g. GBPUSD) and YYYYMMDD is the specified date (e.g. 20140112).
Note also that when we begin storing our trades in a relational database (as described above in the roadmap) we will need to make sure we once again use the correct data-type. PostgreSQL and MySQL support a decimal representation. It is vital that we utilise these data-types when we create our database schema, otherwise we will run into rounding errors that are extremely difficult to diagnose!
The currency exchange rate is the rate at which one currency can be exchanged for another. It is always quoted in pairs like the EUR/USD (the Euro and the US Dollar). Exchange rates fluctuate based on economic factors like inflation, industrial production and geopolitical events. These factors will influence whether you buy or sell a currency pair.
Let's presume that the market keeps on going against you. In this case, the broker will simply have no choice but to shut down all your losing positions. This limit is referred to as a stop out level. For example, when the stop out level is established at 5% by a broker, the trading platform will start closing your losing positions automatically if your margin level reaches 5%. It is important to note that it starts closing from the biggest losing position.
Now, let’s say you open a trade worth $50,000 with the same trading account size and leverage ratio. Your required margin for this trade would be $500 (1% of your position size), and your free margin would now also amount to $500. In other words, you could withstand a negative price fluctuation of $500 until your free margin falls to zero and causes a margin call. Your position size of $50,000 could only fall to $49,500 – this would be the largest loss your trading account could withstand.
If you sell a security short, you must have sufficient equity in your account to cover any fees associated with borrowing the security. If you borrow the security through us, we will borrow the security on your behalf and your account must have sufficient collateral to cover the margin requirements of the short sale. To cover administrative fees and stock borrowing fees, we must post 102% of the value of the security borrowed as collateral with the lender. In instances in which the security shorted is hard to borrow, borrowing fees charged by the lender may be so high (greater than the interest earned) that the short seller must pay additional interest for the privilege of borrowing a security. Customers may view the indicative short stock interest rates for a specific stock through the Short Stock (SLB) Availability tool located in the Tools section of their Account Management page. For more information concerning shorting stocks and associated fees, visit our Stock Shorting page.