Preschool - Margin Trading

Question 1

What does Margin allow you to do

Answer 1

Margin trading allows you to enter trades larger than your account balance

Question 2

What is Balance

Answer 2

Balance is the Capital in your account. Your balance is only affected when deposit, withdraw and close a trade

Question 3

What is Unrealized P/L and Floating P/L vs. Realized

Answer 3

Unrealized or Floating is the P/L for the current Open Trade, Realized is once the trade is closed.

Question 4

What is Margin

Answer 4

Margin is the amount of capital required to open a position. Similar to a deposit. Margin is a % of the full position size.

Question 5

What is Equity

Answer 5

Equity is the current value of your trading account. It is the sum of balance plus fluctuating profit and loss.

Question 6

What is free margin

Answer 6

Free margin is the difference between equity and used margin

Question 7

What is leverage

Answer 7

Leverage is the increased trading power available when using margin.

Question 8

What is the difference between Margin in Securities vs. Margin in Forex

Answer 8

In securities - trading stocks on margin means you are borrowing money from the broker; in FX it is a deposit.