Trying to understand Margin and Leverage

Beginner Questions Trading Psychology
1

In one of the lessons here they give an example for Margin and I just want to copy it here and ask if anyone can explain a little further on it just for me to understand the advantages and disadvantages of it.

*The Example *
let’s say you open a mini account that provides a 200:1 leverage or 0.5% margin. Mini accounts trade mini lots. Let’s say one mini lot equals $10,000.

If you were to open one mini-lot, instead of having to provide the full $10,000, you would only need $50 ($10,000 x 0.5% = $50).

  • My Questions *
    What happens if you make a profit from this trade?

Are you expected to pay back the $10,00 over time

and most importantly, What happens if you make a loss from this trade?

2

Ok, let’s say, you have $1 000 account. You will open buy, one mini-lot transaction for market price, stop loss and profit target are equal 20 pips. Your account will be look like this:
Account balance $950
Margin: $50 ( $10 000 x 0.5%)

if you make a profit $20 it equals 20 pips (one mini lot is $10 000, one pip is worth $1 in this case) so your account increase $20. ($1 020), Margin amount will go back to your account, because this amount is necessary to open position, Position has been close, so margin go back to account.

If you lose this transaction, your account has decrease $20 so in results your account will be $980

Regards
Greg

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