I was wondering if someone can give me a complete run down on how the “margin” works when trading in forex. I know it allows you to trade with more money as if it’s an interest free loan on your actual balance. Each company offers different margins for traders 1:50 1:100 1:500 and then I noticed the reverse 2:1 50:1, etc. and so on. How is that calculated? What’s the difference between 1:50 and 50:1 ratio when it comes to Margin trading. Is it 1:50 means 1,000 will let you trade with 50,000 and 50:1 means 50,000 will let you trade with 1,000 or is it 1:50 = 1,000 gives you 1,000+50,000 to trade with and 50:1 means 50,000 will let you trade with 50,000+1,000?
I am using a demo account and I was just messing with the trades and ended up trading a lot of lots to almost where I did not have enough margin left. (This was for the sole purpose of figuring out the leverage system). I had 100,000 as the starting balance for the demo and when my trade’s made my balance go down to around 70,000 it automatically closed my trade. I did not put in a stop loss. I read somewhere that the company puts an automatic stop loss for you. How does the system calculate what the stop loss is? I am assuming if I had 10,000 then my trades would have closed when my balance hit 7,000.
What does the Margin, Free Margin, and Margin level all mean? How is it calculated. And if you can give me links to posts or articles/info for more on this it would be much appreciated. Thanks.