Margin & Leverage FAQs
- Can I trade on margin (or leverage) at TradeKing Forex?
- What are margin and leverage?
- What are the margin requirements at TradeKing Forex?
- Is margin in forex trading different from stock trading?
- Are there disadvantages to trading on leverage?
- How can I prevent liquidation of my open positions?
- How do I change the leverage in my TradeKing Forex account?
- Will I be notified if I am on margin call?
- How can I manage risk in volatile markets?
Can I trade on margin (or leverage) at TradeKing Forex?
Yes, you can trade on margin here at TradeKing Forex. This means that you aren’t required to deposit cash for the full value of your position. Remember increasing leverage, increase risk.^top
What are margin and leverage?
Margin and leverage are concepts that go hand-in-hand in currency trading. Trading “on margin” means you need only deposit a percentage of the total funds required for a trade. Similarly, a deposit can be leveraged so that you can trade positions significantly larger than the amount you have in your account. These small movements can result in larger profits, or larger losses when compared to an unleveraged position.
Because small price movements can potentially have large effects on your account, trading on margin (or with leverage) can be risky.^top
What are the margin requirements at TradeKing Forex?
The minimum margin requirement is 2% (or 50:1) on the majors, 5% (or 20:1) for all minor currency pairs, and 100% (or 1:1) for spot gold and silver. View the full list of margin requirements by currency pair. Learn more about TradeKing Forex’s margin requirements.^top
Is margin in forex trading different from stock trading?
Yes, there are 3 main differences:
- Forex trading can offer up to 50 to 1 margin versus 2 to 1 for stock trading. Learn about TradeKing Forex’s margin requirements.
- In stock trading, you pay your brokerage firm interest on the amount you borrow. TradeKing Forex does not charge interest on the leveraged amount
- When trading stock on margin, you are subject to “margin calls” – mandatory requests to supplement your cash deposit, should the position move against you.
TradeKing Forex does not engage in margin calls, and requires 100% maintenance margin at all times to help ensure that you don’t lose more money than you deposited.^top
Are there disadvantages to trading on leverage?
While leverage enables you to control a large amount of capital with a limited cash deposit, it can also expose you to significant losses.^top
How can I prevent liquidation of my open positions?
Here are some techniques that can help you avoid liquidation of your open positions:
- Lower your margin. You have the flexibility of adjusting your margin to 20:1 or 10:1 at any time.
- Keep your account funded in excess of your required margin. These extra funds act as a cushion, protecting you if the market moves against you.
- Actively manage your positions using limit and stop orders. Keep in mind that contingent orders may not necessarily limit your losses.
How do I change the leverage in my TradeKing Forex account?
You can submit a request to adjust your leverage by logging into ForexTrader and accessing MyAccount. You can request margin of 50:1, 20:1 or 10:1..^top
Will I be notified if I am on margin call?
TradeKing Forex does not engage in margin calls. However, your open positions may be liquidated if your account balance falls below 100% of the required margin. Our systems continuously monitor your available margin and will automatically close out positions on your behalf.^top
How can I manage risk in volatile markets?
Forex markets are the most traded and often the most volatile financial markets in the world, influenced by a wide variety of political and economic factors. These characteristics provide constant trading opportunities, but also mean that forex markets can experience sudden and dramatic adverse price movements.
It is possible to help protect yourself from sudden price movements and market gaps by employing risk management techniques:
Add funds to your account to reduce the chance of position liquidations due to insufficient margin.
The greater your excess margin cushion in relation to your required margin, the more likely it is that an adverse market movement will not result in a position liquidation.
Place stop orders against open positions to help reduce your risk
Adding a contingent order to an open position helps to ensure that your downside risk is limited. Please remember that a stop order will be executed at the next available price, which may be a distance away from your stop price if the market gaps. Placing contingent orders may not necessarily limit your losses.