MARGIN TRADING-FOREX

Margin Trading
Margin" literally means a difference, or reserve. In this sense, margin trading is to trade securities backed by a deposit of money (the deposit serves as collateral to your account). The margin is measured in percentages from the total value of the position, for example a 1% margin of a 1000-lot position is equal to 10 lots
How to trade on margin
You could trade on margin stocks, currencies or indices. The key feature of margin trading is that if you would like to buy 1000 IBM shares with a total value of $94 450, for example, you do not need to possess the full amount in your account in order to do this.
stock trading
If for example, the required margin is 30%, you need to have $30 in your account in order to buy stock valued at $100. When a deal is closed, the client’s account undergoes certain changes:
Let’s say that you have $1000 and would like to buy 10 IBM shares. Share price is $94.45 and therefore the total transaction value is $944.50. If the required margin is 30%, then the amount you should have in your account is $283.35. This means that this amount remains blocked in your account and the remaining $716.65 remains at your disposal for trading other stocks, currencies or indices.
In case that share price increases by $1.50 to $95.95, you will realize a gain of $15. These $15 are added to the $731.65 and the blocked $283.25 gives you a new account total of $1015.
currency trading
Let the margin be 1% and funds available in your account are 1000 BGN. You could trade currency in lots, where 1 lot equals 2000 USD (or 2000 of any other currency). You would like to buy 15 lots or $30 000 at a market exchange rate of USD/BGN 1.2550. In order to conclude the deal, you need to have a margin of 376.50 BGN in your account (calculated through the current USD/BGN exchange rate). The remaining 623.50 BGN are free funds you could use to trade other currencies, shares of indices.
In case that the market exchange rate increases to USD/BGN 1.2590, you realize a profit of 120 BGN which is added to your account. Free funds in your account are now 743.5 BGN and the margin is 376.50 BGN which adds up to a total account balance of 1120 BGN.
trading with stock indices
Let the required margin be 15% and you have $2000 in your account. You would like to buy 1 Dow Jones Industrial Average (DJIA) contract, which at present costs $11 000. In order to conclude the deal you need a margin of $1650 in your account. The remaining $350 is available funds you could use to trade with other indices, currencies or stocks. In case the market price of the contract increases to $11 100, then $100 are added to your account. Funds available for trading increase to $450 and the margin is $1650 so that your total account balance stands at $2100