Can someone summarize the above concepts in terms that a 3rd grader could understand? I am making my way through the School of Pipology, and am having a hard time grasping these concepts.
Cheers :o
I’ll try:
Margin - the deposit of good faith that is held as security by your broker for the position the broker opens for you
Leverage - say 100:1. That means that 1$ of margin will allow you to control a position of 100$
Risk management - cannot be boiled down really. Suffice to say that it may be the most important part in trading. Simple rule could be: don’t ever risk more than x percent of your account in a single trade
Could also be only to enter trades with a high probability of you winning.
Or another way…
Margin = money in your account. When you enter a trade, depending on the size of the trade (what each pip is worth) a certain amount of your account will be used to cover the trade (margin used). As the trade progresses you will see your account go up or down depending on how the trade goes. A margin call (trade exited by your broker to cover the loss) will come at different places depending on: Size + your brokers margin call rules.
Leverage= using a small amount of money to trade with a larger amount of money. 100:1 leverage means that for every 100 dollars you trade you have to have 1 in your account to cover it. It does not mean that you have to use the full amount of leverage your account is capable of. This is where people get confused. Leverage isn’t dangerous at all. If fact you want as much as any broker is willing to give because more leverage equals less required in your account to trade. Leverageing your entire account balance in one trade or high percentages, that is dangerous.
Which leads to…
Managing risk: If you decide to only risk 1% of your account on any one trade you are still risking only 1% on any one trade regardless of your leverage ratio (margin requirment to cover a trade). So, if you ratio is 100:1 or a 1000:1 you can still set it up to risk only 1% of account balance (available margin). There is more too it, but that is the start of risk management.
Other risk management concepts are things like risk/reward ratio. For instance, you might have a 2:1 risk reward ratio that risks a loss of 10 pips to win 20. Built into this ratio might be the 1% of your account you are willing to risk. So, if you would divide 1% of your account over 10 pips (your risk % / 2/1 ratio) and that would be your pip value. This is just one way to do it, but pretty common.
Some people just go by over all value of the account and don’t worry about pip value and sl. Some just say if I lose 5% of my account in one day, regardless of how many trades, I’ll stop trading for the day.
So, you can see their are many ways to manage risk and look at it.
Hi friends
I am trying to explain these terms for you in very simple words…
Leverage- Leverage is the maximum limit of trading or Exposure given by the broker to a trader…it can be different for the different brokers for example My broker AvaFx is giving me the leverage of 200:1.
Margin-Margin is the amount of currency required in your account to keep your trades on the market. Suppose you are trading at 50:1 leverage and you have an open trade for 10,000USD, the margin necessary in your account to carry that trade is around $200USD. You can shape out this number by dividing your trade size by your leverage amount.
So 10,000/50 = 200.
Leverage is the ability to gear your account into a position greater than your total account margin. For instance, if a trader has $1,000 of margin in his account and he opens a $100,000 position, he leverages his account by 100 times, or 100:1. If he opens a $200,000 position with $1,000 of margin in his account, his leverage is 200 times, or 200:1. Increasing your leverage magnifies both gains and losses.
margin
The deposit required to open or maintain a position. Margin can be either “free” or “used”. Used margin is that amount which is being used to maintain or open a position, whereas free margin is the amount available to open new positions. With a $1,000 margin balance in your account and a 1% margin requirement to open a position, you can buy or sell a position worth up to a notional $100,000. This allows a trader to leverage his account by up to 100 times or a leverage ratio of 100:1. If a traders account falls below the minimum amount required to maintain an open position, he will receive a “margin call” requiring him to either add more money into his or her account or to close the open position. Most brokers will automatically close a traders open positions when the margin balance falls below the amount required to keep the positions open. The amount required to maintain an open position is dependent on the broker and could be 50% of the original margin required to open the trade.
These are all good answers and show understanding by the posters.
It is going to take you time to grasp these concepts, [B]DKRanger22[/B] 
Forex has a technical language all of its own!!
But persist, because in the end, it will all come together!!