Internet trading was a huge milestone achievement in the financial industry. Before this breakthrough, forex investors are large organizations like banks, companies, as well as few individuals that are willing to risk a huge amount of money trading currencies through a specific medium that was not open to all and sundry. With the development of electronic trading networks, individuals can trade with no medium restrictions as the market is open to anyone at all from any part of the world. To actually make real profits from currency exchange, a good sum of trading deposit is required. How can one fund his or her forex account in order to trade profitably?
MARGIN ACCOUNTS AND LEVERAGE:
A margin account is a medium through which a broker can lend money to customers for the sole purpose of trading commodities in the currency exchange market; while leverage is an investment strategy of increasing the potential return of an investment using borrowed money. Just like the electronic trading networks, the margin accounts and leverage help to boost forex. This is one method a trader can use to fund his or her forex account, obviously based on the condition that a certain amount of money is deposited as trading capital.
With this sort of opportunity, it comes to mind as to how the brokers intend to manage the funds given out to customers online. Just like the banks giving out loans, the brokers are very careful when dealing margin and leverage with a client. There are rules and regulations set in place to ensure the safety of the money. For starters, traders into this sort of agreement with their broker cannot withdraw the money lent to them. And in the case of losses, the whole account balance is wiped out.
IS IT ADVISABLE TO TAKE AN ACTUAL LOAN FROM A BANK TO TRADE THE FOREX MARKET?
An actual loan entails real collateral handed over to the bank, and real “withdraw able” cash in the possession of the customer. How advisable is it to do so just to fund one’s forex account. This is a no brainer at all to some traders that answered the questions. Judging from experience, most of the think it is unreasonable. What if the trades did not turn out in your favor? But that is what forex trading is all about; taking risks. As risky as it may be, the best thing will be to start small with an amount of money you will not feel too bad to lose.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.