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Forex Margin Requirements

No matter what kind of account you set up with your Forex broker, there are going to be Forex margin requirements. Put very simply, this indicates the amount of money you need to keep in your account in order to trade.

The reason there are Forex margin requirements is to protect the broker from having to come up with money from his own pocket. Keep in mind that when a trade is made, the trader in reality only puts up a fraction of the money the contract is worth. When the money runs low and is below the Forex margin requirements, the trader is put on margin call. He has to put more money into his account.

Wiggle room

It's never good to trade scared. Trading scared can take on many forms, but the most prominent manifestation of the beast is to be close to your Forex margin requirements. When that happens, the Forex trader feels the pressure of having to make money not only for his livelihood, but also to avoid being put on margin call. This rarely works out well.

What often times happens is that the trader will try to make a big score, or trade over his head, and that never works out well. Because the trader has drifted from his game plan; from his trading strategy; he is no longer trading the market, but rather he's trading simply for Forex margin requirements.

The logical thing for any trader to do is make sure he has enough money in his account to be able to trade according to his strategy, and not have to worry about losing a bit of money. This kind of attitude will generally lead to Forex profits as opposed to continued losses.

Another philosophy to be adhered to on the other side of the spectrum: What happens when you have more than enough money in the account and you're nowhere near the Forex margin requirements? It's wise to withdraw money from your account when you have an over abundance. Not only should you be paying yourself a salary, but you also want to be protected against anything catastrophic that may happen to your broker. Better safe than sorry.

Change quantities

If you don't have the money to deposit in your account to give yourself enough breathing room, then the recommended tactic is to change the quantities you're trading. And that doesn't mean make them bigger. On the contrary, you should make them smaller.

You're not going to make it all back in one shot. Sure, it's possible but like everything else in trading Forex, you have to go with the odds. Lower your quantities. If necessary, switch to a mini trading account. And if necessary after that, switch to a micro trading account. It is always best to try to inch your way back to the top rather than try to make it all back in one fell swoop.

Your Forex margin requirements should never get in the way of your trading. It's up to you to make sure they don't influence your trades. The support and resistance lines on your charts are your buy and sell indicators; not the money in your account.