Trading on a margin can have varying consequences. It can influence your trading experience both positively and negatively, with both profits and losses potentially being seriously augmented. Your broker takes your margin deposit and then pools it with someone else's margin Forex deposits. Brokers do this in order to be able to place trades within the whole interbank network.
Retail or beginning traders often trade currency in micro lots, because one pip in a micro lot represents only a 10-cent move in the price. This makes losses easier to manage if a trade doesn't produce the intended results. In a mini lot, one pip equals $1 and that same one pip in a standard lot equals $10. Some currencies move as much as 100 pips or more in a single trading session making the potential losses to the small investor much more manageable by trading in micro or mini lots.
Forex margin is a good faith deposit that a trader puts up as collateral to initiate a trade. Essentially, it is the minimum amount that a trader needs in the trading account to open a new position. This is usually communicated as a percentage of the notional value (trade size) of the forex trade. The difference between the deposit and the full value of the trade is “borrowed” from the broker.
Trading on margin refers to trading on money borrowed from your broker in order to substantially increase your market exposure. When opening a margin trade, your broker lends you a certain sum of money depending on the leverage ratio used, and allocates a small portion of your trading account as the collateral, or margin for that trade. The remaining funds in your trading account will act as your free margin, which can be used to withstand negative price fluctuations from your existing leveraged positions, or to open new leveraged trades. The relation between your free margin and other important elements of your trading account, such as your balance and equity, will be explained later. For now, it’s important to understand the meaning of margin in Forex.
In particular I've made the interface for beginning a new backtest a lot simpler by encapsulating a lot of the "boilerplate" code into a new Backtest class. I've also modified the system to be fully workable with multiple currency pairs. In this article I'll describe the new interface and show the usual Moving Average Crossover example on both GBP/USD and EUR/USD.
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