Understanding BizFOREX's IFT Margin Rules

The BizFOREX IFT Platform allows currency trading on a margin basis. There is an upside and a downside to margin-based trading. The upside is that the trader can strongly leverage the funds in the account and generate a large profit relative to the amount invested. The downside is that the losses can be just as great, and the trader can easily risk all of the funds in the account. Hence it is important that traders fully understand BizFOREX's margin rules as described below before they start trading.

What is margin trading

When a trader buys (goes long) or sells (goes short) a currency pair, then the value of the currency pair, as an instrument, is initially close to zero. This is because (in the case of a buy) the quote currency is sold to buy an equivalent amount of the base currency. As the market rates fluctuate, however, the value of the currency pair position held will also fluctuate. Thus, if the rate for the currency pair goes down, the trader's long position will lose value and become negative. To ensure that the trader can carry the risk in the case a position results in a loss, banks typically require sufficient collateral to cover those losses. This collateral is typically referred to as margin.

Margin-based trading refers to trading in transaction sizes larger than the funds in the account. By leveraging the funds in the account, traders can take better advantage of small movements in the market to build up profits quickly. Conversely, leveraging one's account to trade in larger transaction sizes can just as easily work against a trader and magnify losses, essentially putting most of the funds in the account at risk.

BizFOREX's margin rules

There is margin deposit requirement of $3,000.00 to open a trading account with BizFOREX. However, BizFOREX's IFT Platform enforces two rules or requirements:

Margin Rules :

Day-Trade = US$ 1,000

Overnight = US$ 2,000

Call-Margin = 50%