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PREVIOUS ARTICLE Currency correlation

In forex, the margin is the miminum amount – or deposit – required to place a trade. Think of margin and deposit as interchangeable terms.

Many brokers offer leverage of 100 to one, which means that your $1,000 deposit can get you as much as $100,000 in currency. Or, putting it another way, if you want to purchase $100,000 of USD/EUR at 100:1 leverage, you’ll need to cough up the 1 per cent margin, or $1,000.

Should the currency pair move in your favour by 1 per cent, your gain is catapulted to 100 per cent – a $1,000 profit suddenly becomes a $2,000 profit. Of course, a move in the other direction means your initial $1,000 deposit is completely wiped out.