Margin

The term margin is used in broker-financed or leverage-based stock market trading. The margin is a security or deposit put down to secure the loan. In exchange for the margin, the trader receives a loan which they can use in trading.

The term is also used in leverage-based forex trading, where to “trade on margin” describes the practice of betting a large, leveraged amount of currency on the development of a specific currency’s rate.

If the bet fails, in that the currency rates do not change in your favor, your margin may end up being too small to cover your losses. In this case your broker will perform a “margin call”, which means they will demand that you either make additional deposits to extend the margin, or exit your position. In the worst case, trading can lead to heavy losses which can far surpass the amount covered by your margin.

More on this topic:
Swiss broker comparison
Swiss foreign broker comparison
What is an ask price?
What is a base currency?

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