this is from babypips school of pipsology:
Joe finds a currency pair whose interest rate differential is +5% a year and he purchases $100,000 worth of that pair. Since his broker only requires a 1% deposit of the position, they hold $1,000 in margin (100:1 leverage). So, Joe now controls $100,000 worth of a currency pair that is receiving 5% a year in interest.
What will happen to Joe’s account if he does nothing for a year?
Well, here are 3 possibilities. Let’s take a look at each one:
1.Currency position loses value. The currency pair Joe buys drops like a rock in value. If the loss brings the account down to the amount set aside for margin, then the position is closed and all that’s left in the account is the margin – $1000.
my question:
so basically joe buys 1 standard lot = 100 000$, and all thats required is 1000$ set aside as margin.
now the loss makes joes account go down from 9000$ to 1000$ and the trade is now closed.
how much money is left? is it 1000$ or -1000$?
im confused
