frequently asked questions

What is margin?

Margin can be thought of as a good faith deposit required to maintain open positions. This is not a fee or a transaction cost, it is simply a portion of your account equity set aside and allocated as a margin deposit. Margin requirements (per 1K lot) at FXCM are determined by taking a percentage of the notional trade size plus a small cushion. A cushion is added to help alleviate daily/weekly fluctuations.

Why trade on margin?

Trading on Margin (Trading with Leverage*) is a common attraction of the forex market. It allows you to open trades that are larger than the capital in your account.

Example

Trading on margin

In the example above, 250,000 dollars have been purchased through a long USD/JPY position with a $5,000 account balance (50:1* Leverage).

Trading on margin can both positively and negatively affect your trading experience as both profits and losses can be dramatically amplified.

What leverage does FXCM offer?

Micro accounts held with FXCM LTD have acess to approximately 400:1* leverage.

Why FXCM encourages lower leverage?

When you use excessive leverage, a few losing trades can quickly offset many winning trades. To clearly see how this can happen, consider the following example.

Scenario: Trader A buys 50 lots of USD/JPY while Trader B buys 5 lots of USD/JPY.

Questions: What happens to Trader A and Trader B account equity when the USD/JPY price falls 100 pips against them?

Answer: Trader A loses 45% and Trader B loses 5.5% of their account equity.

Example
TRADER A TRADER B
Account Equity $5,000 $5,000
Notional Trade Size $250,000 (Buys 250, 1K lots) $25,000 (Buys 25, 1K lots)
Leverage Used 50:1 (50 times) 5:1 (5 times)
100 Pip Loss in Dollars -$2,750 -$275
% Loss of Equity 55% 5.5%
% of Equity Remaining 45% 94.5%

By using lower leverage, Trader B drastically reduces the dollar drawdown of a 100 pip loss.

Where can I view FXCM's up-to-date margin requirements?
Up-to-date margin requirements are listed by currency pair in the MMR column of the Simple Dealing Rates window within the platform.
Is there a debit balance risk? Can I lose more money than I deposit?

Not with FXCM. We guarantee you can never pay a debit balance as a result of trading.
One of the greatest concerns traders have about leverage is that a sizable loss could result in owing money to their broker.
At FXCM, your maximum risk of loss is limited by the amount in your account. All accounts are tracked by our "Margin Watcher" feature. With the Margin Watcher feature, if account equity falls below margin requirements, the FXCM Trading Station will trigger an order to close all open positions.

* Leverage is a double-edged sword and can dramatically amplify your profits. It can also just as dramatically amplify your losses. Trading foreign exchange with any level of leverage may not be suitable for all investors.