When opening a Forex account the margin balance is the amount of your own money that you put into it. This is the money that will be funding your trades. Don’t go mental here my friends, Forex trading is a risk and if your a begineer definitely don’t put in any more money than your comfortable with losing. No re-mortgaging please!
The practice accounts are the best way to get started, most if not all of the online Forex brokers will provide one.
To my great dismay the online Forex brokers require me to whip out my credit card and whack in some of my own money to the account in order to trade. I thought about sending off an e-mail to them suggesting a deal, where if they allow me to play with their money I’ll only take a 50% cut of whatever I make, citing beginners luck would have to give me the edge in currency markets!
Alas, I considered that this approach would be flatly laughed at, so as most online Forex brokers give you demo accounts to practice with, I reckoned this would be the best place to start. Just a word of warning guys, my next few posts will have a look at the terms around P&L, Margins, Liquidations, etc and will probably be a bit boring and lacking my usual wit, but I’ll try my best to keep them entertaining!
The ‘P&L’ will be a term that the Forex trader will be the most interested in, and no it does not mean Pay & Leave, it’s the Forex traders Profit & Loss!
This number sums it all up, it tells us if your a winner or loser. For online Forex traders this is very important as the P&L effects the amount of money that the Forex trader has to trade with. If the currency moves against the Forex trader then the loss could potentially be so great that it could wipe out the amount of money that he has to trade with! So Be Careful Out There People!
Another term that the novice trader might come across in the Forex market is being square or flat. Square or Flat in the Forex universe, means that you have no exposure (or risk) on a currency market, so you won’t lose any money from the currency movements.
The term is also used when exiting the market as in ’squaring up’ or ‘going flat’. Squaring up is when you have an open position and you are going to close. So if you’ve sold a currency, your ’squaring up’ when your buying the currency and ‘going flat’ when you’ve bought a currency and are now selling it.
