Category: 6. Margin Trading 101

What does “Stop Out Level” or “Stop Out” mean? The Stop Out Level is similar to the Margin Call Level, which was covered in the previous lesson, except that it’s much worse! In forex trading, a Stop Out Level is when your Margin Level falls to a specific percentage (%) level in which one or all of your…

What does “Margin Call Level” or “Margin Call” mean? In forex trading, the Margin Call Level is when the Margin Level has reached a specific level or threshold. When this threshold is reached, you are in danger of the POSSIBILITY of having some or all of your positions forcibly closed (or “liquidated“). The Margin Level is the “metric” and the “Margin…

What does “Margin Level” mean? The Margin Level is the percentage (%) value based on the amount of Equity versus Used Margin. Margin Level allows you to know how much of your funds are available for new trades. The higher the Margin Level, the more Free Margin you have available to trade. The lower the Margin Level,…

What does “Free Margin” mean? Margin can be classified as either “used” or “free”. Used Margin, which is just the aggregate of all the Required Margin from all open positions, was discussed in a previous lesson. Free Margin is the difference between Equity and Used Margin. Free Margin refers to the Equity in a trader’s account that is NOT tied up in…

What does “Equity” mean? The account equity or simply “Equity” represents the current value of your trading account. Equity is the current value of the account and fluctuates with every tick when looking at your trading platform on your screen. It is the sum of your account balance and all floating (unrealized) profits or losses associated with your open…

What does “Used Margin” mean? In order to understand what Used Margin is, we must first understand what Required Margin is. Whenever you open a new position, a specific amount of Required Margin is set aside. Required Margin was discussed in detail in the previous lesson, so if you don’t know what it is, please read our What is Margin? lesson…

What is margin? When trading forex, you are only required to put up a small amount of capital to open and maintain a new position. This capital is known as the margin. For example, if you want to buy $100,000 worth of USD/JPY, you don’t need to put up the full amount, you only need to put up a…

In your trading platform, you will see something that says “Unrealized P/L” or “Floating P/L” with green or red numbers beside them. In this lesson, we explain what Unrealized P/L and Floating P/L are. When trading, there are actually two different types of “profit or loss”, also known as “P/L”. Both are important. Let’s discuss the difference between the…

What does “Account Balance” mean? In order to start trading forex, you need to open an account with a retail forex broker or CFD provider. Once your account is approved, then you can transfer funds into the account. This new account should only be funded with “risk capital”, which is cash you can afford to lose. The “Account…

The biggest appeal that forex trading offers is the ability to trade on margin. But for many forex traders, “margin” is a foreign concept and one that is often misunderstood. Like Bob. Bob sure knows his fried chicken and mashed potatoes but absolutely has no clue about margin and leverage. Margin trading gives you the ability…