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%