What is the forex margin trading?

Comparison in the commission fees

The width to the cost is most important for the investors in the short term. The width to the cost is calculated simply from the summation of the spread and the round trip commission fees and it would provide the break even point for their trading cost in the forex market. The width to the cost is always the expense for investors regardless of their capacity. It is taken away even if you lose. The cheaper commission fees result in decreasing the cost to take part in the forex market. The normal range of USD-JPY is usually at least 30 points, and it is in average 50 points to 100 points a day, and is probable to move more than 200 points if the forex market moves drastically. The narrower width to the cost follows that it should make your profit bigger and your loss. This fact psychologically affects more favorable to your mind. You will experience to lose the chances for closing your position successfully if the width to the cost is bigger. You might feel negative, "I would have closed my position if the commission fees are cheaper or the spread is a bit narrower".

Think of your probability to win is going down sharply if the width to the cost is set more than 10 points. Even the experts would never win under that condition. That means to make your probability to lose higher in case of the higher commission fees and the wider spread.

Comparison in the spread

We have already explained the importance of the width to the cost. It would be probable to affect your trading style in other aspects. Let us compare the spread in two cases, 5 points and 10 points, for example. Assuming that the trading range is set within 50 points with the lowest at 30 and the highest at 80. On of forex brokers would show "30-35", while others "30-40", when the market price is now just breaking downside. On the contrary one would show "75-80" while others "70-80" when the forex market is now breaking upward around 80. As you can see from this example, if you choose a forex broker with wider spread on the price quotation, it will lead you to lose the chance to buy at the cheapest zone and to sell at the highest. Please remember that such forex brokers as provide for the wider spread tend to force you hard to take profit, because of your play holding in narrower trading range than the actual forex market.

Comparison in the leverage

If you are asked like "Why do you want to trade forex using the forex margin trading?", the most answers must be "That is because I can enjoy the higher leverage effect on it." The high leverage ratio should not be a risk itself for all the investors. This reason is that the market risk in the forex market is dependent on the size of your position regardless of the leverage ratio. There exists another risk when the leverage ratio is too low because it should be difficult for most investors to cut loss easily. In addition, you have to place more deposit for the margin account to trade forex when you choose the lower leverage, and you will lose more money than you expect if you hesitate to cut loss. In adverse, the higher leverage would provide you for various choices in ways to trade forex, and then, you cannot say that the higher leverage should bring about more risks to you. If you feel uneasy against the forex margin trading with higher leverage, you had better invest other instruments but forex.

Help desk for beginners

For the beginners who are not familiar to the forex market convention and the contract specification of the forex margin trading, and the PC usage, we make it a rule to recommend to use some forex brokers who have fully equipped with the help desk on phone. The forex margin trading is a high risk financial product as the leverage ratio is set higher. We never recommend to trade forex without your full comprehension of the risk and structure. You could expect a kind advice although the commission fees are set more expensive than the online trade due to some manpower necessity. Needless to say, you should have better rule out such a forex broker as introduces you to the forex margin trading without saying "it looks like a foreign currency deposit" or "the initial capital should be guaranteed" without any ground.

Comparison in the online system

The point to choose a forex broker with online trade depends on the system platform. Most forex brokers can provide for the demo style trading. First, you have to experience how to easy to use the platform on the demo version, and second, you would find how long to take for making the forex trades and how fair the price quotation is. Finally, you have to compare various platforms to pick up. Pay attention to the price quotation again when to trade in the real time market. In actual, some forex brokers would intentionally slide their price quotation in the direction disadvantageous for the customers, when they could judge the direction of customers' interest. It should be better to withdraw your money from such forex brokers as lead customers to the unhappy road, if you feel uneasy after several trials.

More attention to be needed that there are some other forex brokers who don't prepare the demo style platform. Even if the copy to catch is wonderful, you should not follow such forex brokers as have only the poor equipment. It is most significant to all the investors where the forex brokers can offer the fair price quotation on the real time basis. In addition, this is another key point to capture your own profit or loss on real time basis. It is most important for the platform system whether to be easy to use or not. Let's make sure of it using the demo style trading.


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