The Forex market is sometimes referred to as an interbank market, due to the fact that the majority of transactions between two partners are carried out by telephone or via electronic networks. There is no fixed location where trading is conducted, as is the case with stock and futures exchanges.
The interbank market deals with the majority of all trading turnover, as well as the significant amounts of speculative trading that is conducted on a daily basis. In this way, turnover in the billions is possible. In addition to client trades, the majority of a bank’s total operations are carried out on account of proprietary trades.
Margin Call at Forex Broker?
A margin call, or margin call, is what happens when a trader exceeds his security deposits in a forex trade. To prevent the trader from losing even more money, the broker closes his positions to protect him from larger losses. This means that Forex traders cannot lose more money than they have in the account. However, certain margin calls may occur in connection with the occurrence of a margin call.
2 Types of Margin
When it comes to margin, two variants can occur in forex trading, the used margin and the usable margin. Used margin is the amount of money from a trader that is currently used in open trades. For example, if the forex trader has €15000 of capital in his account and has an open trade of €3000, then the used margin is €3000. The usable margin is the amount of money in the account minus the amount used in open trades. If the usable margin reaches 0 €, then the Forex broker will automatically make a margin call. With good investment management, these situations can be avoided.
Who needs a Forex Managed Account?
Developing a Forex StrategyFor those who want to make good profits, but still want to invest little work in forex trading, a Forex Managed Account is certainly very interesting. With the help of a Forex Managed Account, the trader passively participates in Forex trading and does not have to actively decide when to buy or sell which currency.
Difference from ordinary account
The big difference between a Forex Managed Account and a regular Forex trading account is that with a Forex Managed Account an experienced broker makes the decisions and trades, while with the other, the regular Forex account the trader decides himself.
With the Forex Managed Account, there are two main options: On the one hand, the Forex broker can be given the right to determine the amount of money to trade and the currency. In this case, the Forex broker alone decides what and when to trade, and the trader has no say in the matter.
On the other hand, the trader can set and fix certain specifications with a contract, and the Forex broker must then also adhere to these agreements. For example, the trader can agree to invest only in certain currencies, and a certain limit of money per month can be agreed upon. However, the trader must remember that the forex broker receives a commission for successful transactions, which the trader must pay.
