What is margin?

Trading currencies on margin lets you increase your buying power. Here's a simplified example: If you have $2,000 cash in a margin account that allows 100:1 leverage, you could purchase up to $200,000 worth of currency-because you only have to post 1% of the purchase price as collateral. Another way of saying this is that you have $200,000 in buying power.

Benefits of Margin

With more buying power, you can increase your total return on investment with less cash outlay. To be sure, trading on margin magnifies your profits AND your losses.

Managing a Margin Account

Trading on margin can be a profitable investment strategy, but it's important that you take the time to understand the risks.

• You should make sure you fully understand how your margin account works. Be sure to read the margin agreement between you and your clearing firm. Talk to your account representative if you have any questions.
• The positions in your account could be partially or totally liquidated should the available margin in your account fall below a predetermined threshold.
• You may not receive a margin call before your positions are liquidated.

You should monitor your margin balance on a regular basis and utilize stop-loss orders on every open position to limit downside risk.