FOREX = FOREIGN EXCHANGE = CURRENCY TRADE
--- IT'S RISKY ---
We use risk management to prevent losses.
We use a advicer to decide whether to take a long or short position or to take a position.
Balance is the money you have on your Forex account without taking in account the positions. So it is the money you do not use.
Equity = Balance - (Profit and Loss of all Open Positions).
You need Equity to be able to take positions(pay the margin),
but also as a buffer to the loosing positions.
For every position you take you have to pay margin.
The margin you see in your MT4 client is the total margin for your open positions.
The amount of your margin depends on the leverage and the lotsize of your position.
If the leverage is 1:1 then the margin is 100.000 units of your currency for lotsize 1.
If the leverage is 1:100 then the margin is 1.000 units of your currency for lotsize 1.
If the leverage is 1:500 then the margin is 200 units of your currency for lotsize 1,
or 20 units for lotsize 0.1
When you close your position you get your margin back.
The free Margin is the is the margin you can still use.
Use you leverage as a buffer for losses not to take as much positions as you can.
MarginLevel = (Equity/Margin)* 100
If the MarginLevel is 120 % you can no longer take positions.
If the Margin Level is 20% the broker starts to close your positions.
Advice: You should never go below 1000% for a margin level that is risky
Advice about positions: