SimpleFX Blog
    Facebook Twitter Instagram
    Wednesday, June 29
    Facebook Twitter LinkedIn Telegram YouTube
    SimpleFX BlogSimpleFX Blog
    Banner
    • Home
    • News
    • Tutorials
    • Updates
    • Opinion
    • Trading Academy
    • Trading Schedule
    SimpleFX Blog
    Home»Trading Academy»What is margin trading? How to trade with a margin account
    Trading Academy

    What is margin trading? How to trade with a margin account

    Zach WrightBy Zach WrightJuly 5, 2019Updated:July 5, 2019No Comments4 Mins Read
    Facebook Twitter Pinterest LinkedIn Tumblr Email

    To margin or not to margin? For some of you, it may seem obvious as trading with leverage is a common thing to do nowadays. Brokers like SimpleFX made it easier than trading stock or forex on a traditional currency account. 

    With SimpleFX, you can do margin trading with your smartphone from everywhere, make a considerable profit, and withdraw the money to your bank account or cryptocurrency wallet. No wonder understanding what margin trading is should be a priority for everyone.

    Modernity brings leverage to the table for everyone. One can leverage and scale-up every professional effort, reaching customers everywhere. The same applies to art, fame, personal brand with tools like Instagram or YouTube. You should also leverage your investment. But only when you know how to run the risk management correctly. 

    Grab the opportunities

    Everyone knows why the rich get rich, and the poor stay poor. It’s all about the accumulation of power. Have you ever played Texas hold’em poker? The player with the biggest stack has an enormous advantage over others. Why? Because she or he can make the best of each hand that comes. The same can be done with trading. When you see an opportunity, you need access to more capital.

    That’s why margin trading is so popular. It gives you precisely this. You can have a higher profit from your stock, commodity, crypto, or forex trading tying up the same amount.

    Let me give you an example. You are observing a sector – be it blockchain technology startups – and you see this public traded company that has this fantastic plans you believe in, but the stock is still reasonably cheap. You’d like to buy in the short term as much stock as possible, as there’s some buzz growing.

    Often a one-way trade to the skies

     When trading with a traditional brokerage account in your bank, you could use all the cash you have on hands – let’s say $1,000 – and buy the company’s stock. You will be able to buy precisely $1,000 worth shares. If you want more, you need to borrow some money.

    This is precisely what you do with margin trading. Your broker lends you the money. If you buy the stock with a SimpleFX WebTrader with 1:2 leverage, you get $2,000 worth share with your $1,000 deposit.

    SimpleFX WebTrader offers leverage as high as 1:50 for trading stock. This means that in this specific situation, you could be granted an automatic margin loan of $49,000 to realize an investment you believe in.

    Now, let’s say the company’s stock went up 50%. If you traded with a traditional broker, you’d earn $500 – not bad. If you purchased with 1:2 leverage, the profit would double up to $1,000, and if you traded with 1:50 leverage you would buy $50,000 worth of stock and make $25,000!

    Margin risk management is a must

    Now, what happens when the market goes the other way? The higher the leverage you trade with, the faster you will lose the funds. That’s as simple as this. That’s why everyone thinking about margin trading should have high-risk tolerance, and understand that opening a position with 1:200 or 1:500 leverage is an excellent opportunity to make a considerable profit, but it is a one-way ticket. You either earn loads of money or clean your account. 

    That’s not as bad as it sounds. Each SimpleFX account has negative balance protection and no minimum deposits. Opening a position with leverage, you get the unlimited upside, and a drown bottom line downside – which is the deposit you keep on your account. 

    Once the investment falls – can trigger a margin call – the broker will send you a message – if you have no money to deposit, they close the position. Sell the investment with loss. If you margin trade – respect the market and remember…

    Now the best thing. With SimpleFX, you can run multiple accounts in different fiat and cryptocurrencies. This structure of hedging and risk diversification allows you to make the most of each opportunity that comes. All you have to do is to buy (or sell) on margin any asset you believe in be it Bitcoin, Ethereum, Ripple, Tesla, S&P 500, USDTRY, USDTRY, gold, oil – anything.

    Here are some key takeaways:

    • Margin is when you borrow from broker money to buy securities
    • Margin trading is buying or selling the securities for borrowed money
    • On a margin trading account you can trade with leverage and the deposit is collateral for some time
    • Opening a margin account is more comfortable than opening a cash account

    Good luck with your margin trades. Make sure you use your stop losses or practice with demo accounts or with little funds for a start.

    featured tutorials
    Share. Facebook Twitter Pinterest LinkedIn Tumblr Email
    Previous ArticleGoogle, Amazon, Microsoft, Nintendo, Sony, Dell, HP, and more companies to move production out of China
    Next Article Keep an eye on the German economy and Deutsche Bank as they may point the direction of global markets
    Zach Wright

    Related Posts

    A Possible Rebound Scenario for Japanese Stocks?

    June 28, 2022

    How Long the Recent LTCUSD Run Can Last?

    June 24, 2022

    Is BMW Worth It After the New China EV Plant Activation?

    June 23, 2022

    Leave A Reply Cancel Reply

    Copyright © 2022. SimpleFX
    • SimpleFX WebTrader
    • Unilink Affiliate Tracker

    Type above and press Enter to search. Press Esc to cancel.

    We and our partners use cookies for analytics purposes and to serve personalized ads. You can view our privacy policy here and our cookies policy here
    Accept.
    Privacy & Cookies Policy

    Privacy Overview

    This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
    Necessary
    Always Enabled
    Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
    Non-necessary
    Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
    SAVE & ACCEPT