9 Best Forex Brokers with a Minimum 10 USD Deposit in Nigeria

How does Margin Work?

👉 Margin trading is a technique used to boost your buying power, allowing you to execute a much larger trade. By using margin, you can use a fraction of the capital necessary to start a significantly larger trade.

👉 This implies that instead of paying the whole value of the position, which is not always within the financial capabilities of traders, you only pay a fraction of it, and this is referred to as the ‘initial margin’.

👉 Margin trading can be extremely advantageous, but it is also risky since you could lose your whole investment. However, retail traders typically have negative balance protection which is automatically applied to retail accounts.

👉 Negative balance protection, however, is something that is not applied to professional trading accounts. Subsequently, professional Nigerian traders could lose more than their initial investments, and they could be asked to make further deposits to replace their losses, known as a margin call.

👉 Margin is just the amount of money necessary to initiate a trade (kept as collateral by the broker), while leverage is the exposure multiplied by account equity.

👉 Nigerian traders must remember that the margin rate dictates the amount of margin, and this varies according to the trading instrument and the underlying market’s volatility and liquidity. In addition, market volatility is the ability of a market to change by a certain percentage in a particular market. Volatility is often inextricably tied to liquidity as well.

Exploring Leverage Ratios

👉 Leverage ratios and margin requirements will always vary per broker according to several factors, including regional regulations and laws. Typically, 100:1, 200:1, and 50:1 are common leverage ratios that are supplied, with some brokers offering 1:500, 1:1000, and higher.

👉 In addition, leverage can also depend on the trading volume or the position size that the Nigerian trader opens. Nigerian traders must remember that when they use leverage, they are required to pay a margin requirent before they can execute a trade.

👉 For instance, to use leverage of 1:200 on a trade, traders will be liable to pay a 0.5% minimum margin requirement, while leverage of 1:100 will require a 1% margin requirement, and so on. The higher the leverage ratio, the smaller the margin requirement, allowing Nigerian forex traders to start trading with very low capital.

👉 An important factor to consider is that if you are new to leveraged trading, You must grasp the margin and leverage concepts before trading. Additionally, it is important to practice trading using a demo account within a risk-free environment until you have enough skills to risk real money.

Initial Margin and the Margin Requirement

👉 To initiate a position, the trader must post an initial margin deposit, also referred to as an initial deposit. The initial margin requirements for each market will vary based on the kind of asset, trading instrument, and the trade size of the position.

Short Overview of Margin Call

👉 An investor’s margin account is called if the value falls below the broker’s necessary level. A “margin call” occurs when a broker requests more money from the Nigerian trader to increase the minimum value of the trading account to the required value, known as the maintenance margin.

👉 One thing that Nigerian traders must note, is that there is a correlation between how much margin is maintained and how many equities are involved.

👉 The only way to make up for a lack of margin is to deposit cash into the margin account or sell assets in the margin account to pay off some of the margin loan’s outstanding balance.