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SwingTradingBook (pdf)

FileName: SwingTradingBook.pdf
Language: English
FileType: .pdf
Size: 879 kb

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What is the Margin?

If you have a standard cash stock account, you know that money should be deposited for the full amount of the position you are trading, or if you have a margin account, for at least half of the position. This is in contrast to the FX market, where only a small percentage of the actual position value needs to be deposited prior to taking on entering the trade. This small deposit, known as the margin, is not a down payment, but rather a performance bond or good faith deposit to ensure against trading losses. The margin requirement allows traders to hold positions much larger than their account value. Margin requirements are as low as 1% (and as low as 0.5% on the mini account), meaning for every standard lot size of 100,000 units, you must commit $1,000. However, if you wanted to control a $100,000 in the stock market, you would have to deposit at the very least, $50,000. Even in the futures market, you would have to deposit at least $5,000 to control a $100,000 position. On your trading station, you can see that there are two types of margin: usable and used. Your used margin is the amount