Trading with margin is a negotiation method that uses funds provided by third parties. Compared to regular accounts, margin accounts allow traders to have access to larger amounts in terms of capital values, allowing them to advance their positions.
Essentially, margin trading amplifies the results of operations so that traders can obtain greater profits in even-successful businesses. This ability to amplify results makes margin trading especially popular in low volatility markets, such as the international exchange market (Forex), but it is also used in the stock, commodity and cryptocurrency markets.
Here are some important tips related to margin trading:
1. Alavancagem:
- The alavancagem allows traders to operate with more capital than they have.
- For example, with a leverage ratio of 10:1, you can control $10 assets with just $1 of your own capital.
- However, alavancagem also increases the risk of losses.
2. Margem:
- Aside from the value that you need to deposit to open a position with alavancagem.
- It serves as a guarantee to cover any losses.
- The margin is expressed as a percentage of the total value of the position.
3. Chamada de Margem:
- When your losses approach the margin value, the brokerage issues a margin call.
- You must add more funds to your account to avoid liquidation of the position.
4. Margin Liquidation:
- If your losses continue and your margin reaches a critical level, the brokerage can liquidate your position automatically.
- This is to protect the brokerage and other traders.
5. Equity:
- Equity is the current value of its account, including profits and losses.
- It is calculated as the balance of the account plus the unused value of the margin.
Know that trading with margin requires knowledge, risk management and understanding of two wrapped thermoses.