Page 62 - Ultimate Guide to Currency Trading

Your cash balance to margin amount ratio is often called your skin in the game. When
you have skin in the game, you will be taken very seriously by other investors. When you
have your own money at risk when trading, you are considered to be in the big time, no
matter what your balance.

Getting a margin call can be very disruptive to currency trading. This is because the positions
are closed out before they have the chance to return to a point of profit, or at least return to the point
that they can be closed out at a zero. Since this is a very bad and unprofitable thing, many experts
recommend that you set your Forex trading software to alert you when that margin level is getting
close. This alert is easy to arrange. You can set up the software to e-mail or text you when a margin
call is getting close, and the warning gives you time to get more money in the account.

If you notice that you are close to getting a margin call or the broker notifies you by e-mail or
text that a call is near, you have two options. The first one is the easiest. You can simply make sure
that you make a cash deposit into the account before it is automatically closes out. Depending upon
the overall size of your account, it may not take that much more deposited money to get your account
back in the safe zone. Since depositing more money in your Forex account might be easier said than
done, the next best thing to do is to close out of one of your positions.

Margin Call Management and Prevention

It can be very unprofitable to be in a series of trades and have your Forex brokerage account drop to a
value that you are close to having a margin call. If you have a large account and three, four, five, or
more trades on the books, and you are forced into a margin call, you are running the risk of
completely destroying your entire account. A margin call can be prevented by putting more money in
the account. If this can't be done, then the next best thing to do is to begin to dismantle the trades
you have in your account in an effort to free up margin.

One of the best ways to do this is first to analyze your positions and close out your winning
trades. This would be the best first step, as most professional money managers, traders, and currency
traders know that the first thing you sell when you are close to a margin call is your winners. Begin
selecting the trades in your account that can be sold off in a step-by-step fashion, starting with the
oldest first. Once you have selected the oldest trades, the next thing is to select the trades that are
anywhere near profit-able. Choose the most profitable ones first and close out of them.

Some of the rules of currency trading have changed lately. The U.S.- based regulators
have gotten in on the picture and have changed some of the basic rules of FX trading to
better protect U.S.-based traders. Lower margins, better, reporting, and fuller
Essential registration requirements of Forex money managers are some of the recent changes

brought on by U.S. regulators.