1-6a. Define margin in Forex Trading.

The money that traders deposit (deposit) with a forex company is referred to as margin.

I believe that many of you have seen or heard the statement that trading in forex may be initiated with a minimal investment.

If 100 US dollars = 4 yen, for instance, you would need 100 million yen to buy $1 in US dollars with a foreign currency deposit or swap $1 in US dollars for 100 yen in a foreign currency exchange. With Forex, you can exchange the same million yen for at least ten thousand yen.

This is so that you can trade if you have the sufficient funds for the delivery of the profit and loss. Forex only trades changes in the exchange rate as profit and loss in a differential settlement.

The guarantee for producing profit and loss is provided by margin. The term "Forex margin trading" was coined for this reason.

Forex can trade on a greater scale than it can with a little number of funds by depositing margin and trading rather than the amount needed for the actual trading size. You can see why it's considered that forex is a money-efficient transaction. The "leverage effect" is what gives good fund efficiency.