What is FX Margin Trade? | Rakuten Securities HK
In FX Margin trade, leverage of 20:1 allows you to trade with $1,000 in the market by setting aside only $50 as a security deposit. This means that you can take advantage of even the smallest movements in currencies by trading with more money in the market than you have in your account.
Basic concept of FX margin in forex trade market
FX Margin is one of the major concepts of Forex trade. It is a deposit made in good faith by a trader as security or collateral to start a trade. Fundamentally, it is the least amount that a trader requires in the trading account in order to open a new position. This is usually calculated as a percentage of the notional value of the trade. The difference between the deposit amount and the full value of the trade is loaned out by the broker.
Before moving further, let’s also touch the concept of leverage. Leverage and margin are closely linked because the margin would be, lesser the leverage a trader would be able to use as the trader would have to bring more of his own money (margin) into the trade and thus, borrow less from the broker.
Although, FX margin trade is a very important part of the Forex trading, a lot of people don't understand the importance of FX margin trade. A Forex margin is required to maintain open positions in trade. A margin is not a charge or a transaction cost. Instead, it is a part of your account equity, which is put aside and allotted as an FX margin deposit.
Forex margin trade can have a variety of outcomes. It can affect your trading involvement, both positively and negatively. Both profits and losses can occur in large amounts. Your broker uses your margin deposit to group it with someone else's FX margin deposits. This enables brokers to place trades inside the interbank system. A margin is often estimated as a percentage of the complete amount of the chosen position.
FX Margin Trade
Trading forex on margin allows the traders to increase the size of their position. Margin enables traders to open trading positions with leverage, providing them with more exposure to the FX markets with a smaller starting capital. However, margin can also be a double-edged sword as it amplifies both profits and losses since it is based on the complete value of the trade instead of just the amount essential to open it.
Rakuten Securities HK and FX Margin Trade
Rakuten Securities HK provides leveraged currency trading with a 5% per lot of leverage level. 20:1 leveraging is the maximum limit allowed by the SFC regulations. Necessities for leverage can vary from time to time at the sole discretion and ability of Rakuten Securities HK, depending on the volume of the trade and market conditions. They offer:
Minimum Initial Margin Level – 5%
If you want to open a new position, your existing account equity must be more than the first margin level requirement. Rakuten Securities HK’s initial margin level requirement is 5% of the complete open positions value.v
Minimum Maintenance Margin Level – 3%
When your available equity of an account starts to go beneath the maintenance margin level requirements, Rakuten Securities HK is legally allowed to close open positions until the account equity moves above the position maintenance margin level requirement. As of now, Rakuten Securities offers the maintenance margin level requirement at 3% of open positions value.
Minimum Liquidation Margin Level – 2%
When the equity of your account starts to go under the minimum liquidation margin level requirement, Rakuten Securities HK will be automatically able to close all open positions in your account. The minimum liquidation margin level is two percent (2%) of open positions value.
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