Post No. 21

Margin is a performance bond, or good faith deposit, to ensure against atrading losses. The margin requirement allows traders to hold a position much larger than the account value. In the event that funds in the account fall below margin requirements, your requirebroker will close some or all open positions. This prevents clients' accounts from falling into a negative balance, even in a highly volatile, fast moving market. For example, let's say you have an account with $10,000. That means you have $10,000 of usable margin. If you use $7,000 to Ask 7 lots o f USD/JPY, you now have $3,000 of usable margin left, meaning that you are allowed to lose $3,000 before you are under the margin requirement. The account equity remains at $10,000 until you begin to make or lose money on the position. Now, if the USD/JPY decreases to the point that you end up losing the $3,000 which is left in your account, then the broker will close all of your positions to ensure that you do not lose more than you have in y our account.