As I have already mentioned margin trades do not require
from investor the whole sum of trading contract.
When investors want to make a trading operation, they
deposit a certain sum, which depends upon the total size of the trading
contract, and crediting conditions set up by brokerage firms.
When the brokerage firm provides the leverage of 1:100, this
means that the investor has to pay the pledge of $1,000 for trading $100,000.
The pledge secures brokerage firms from possible trading
losses on FOREX.
Margin trading is very popular because it is easily
affordable to average investors. Investing ones capital for getting fixed
income from securities foreign countries can hardly bring high profits. No one
would dare to doubt that US exchequer bonds are stable and reliable, but they
are expensive and give low
revenue (about 6% annually); that is why they are
regarded as long-term investments. Shares can give higher income, however the
size of dividends strongly depends upon successful (or not) activity of the
company and the favors of shareholders.
Share purchasing for speculating for
the rise of the shares is considered to be more interesting and profitable, but
it requires large volumes of investments.
Margin trades do not have these restrictions: you can buy
and sell whenever you wish and you will need 0.2-10% from the total size of
trading contract.
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