trading margin | BTCC Knowledge

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What is margin trading?

Margin trading means that you don’t pay the full price of the asset. Instead, you only pay a fraction of the underlying security value and the broker lends the rest of the money you need for the margin trade. But what is the margin in trading? There are two types of margins traders should be aware of.

What does it mean to break down'margin'?

BREAKING DOWN 'Margin'. "To margin" means to use borrowed money to purchase securities. For example, if you have an initial margin requirement of 60% for your margin account, and you want to purchase $10,000 worth of securities, then your margin would be $6,000, and you could borrow the rest from the broker.

What is margin and why is it important?

Margin provides “leverage” that, by taking on greater risk, could enhance returns. Through margin, you put up less than the full cost of a trade, potentially enabling you to take larger trades than you could with the actual funds in your account. Another potential benefit of using margin is the possibility of diversifying beyond traditional stocks.

What is the required margin?

Your required margin depends on which assets you choose to invest in. It’s calculated as a percentage of the asset’s price, which is called the margin ratio. Every instrument has its own required margin. In CFD (contract for difference) trading, many forex pairs have a margin requirement of 3.333%.