Importance of Margin and Margin Call

In the forex market, investors have two possible positions, profit position and loss position. In a loss position, there are two possibilities that can be done by the futures brokerage firms, first make a margin call or second liquidate an investor's position. If the position is liquidated, the investor's position must be completed and investors bear all the losses. These losses can still be avoided if the investors meet the futures brokerage firm calls to raise capital. Because, there is a possibility that prices will reverse direction and investors get profit. Therefore, very important to understand margin and margin call from brokerage firms. The benefits:
1. Margin gives investors the opportunity to obtain high leverage. With an initial margin of only 1% of the actual contract value, providing an opportunity for investors to get profit up to 100%.
2. Margin provide flexibility to investors to enter positions in the cash trading. If investor transact in the stock market, for example, they must deposit 100% of their capital for the transaction. Even if investors get margin facility, they only get a maximum of 50% of the capital requirements. With an initial margin of only 1%, forex online trading investors have the opportunity to enter positions easier and cheaper.
3. Margin call provide information to investors to be realistic in the transaction and acted immediately reset their positions. Without this mechanism, investors can forget that his position was in a dangerous situation. Thus, a margin call serves as a wake up call for investors, to immediately act to take firm decisions, thus reducing the danger situation their positions.