Many people who are new to the forex market do not understand the margin requirements in a proper manner. They feel that it requires a lot of money in order to buy currency futures. However, you need to understand that when you are trading derivatives in any segment, there is no need to pay the full amount for the deal. You will have to pay the margin amount that is prescribed by the exchange in order to buy or sell the futures. This will change on a regular basis slightly depending on the volatility of the markets. For this reason, you need to check with your broker with regards to knowing the exact margin required for trading currency futures.
How to check the margin required for currency futures?
The first thing you need to remember while trading currency futures is that the lots will be available in fixed quantity as assigned by the exchange. You will have to buy the futures in the same multiples as prescribed by the exchange. The stock exchange also mandates a minimum margin that has to be collected by the retail traders in order to execute the trade. However, brokers will have some flexibility with regards to intraday trades and they can allot additional margin to certain traders. For this reason, you need to use the currency derivatives margin calculator given by your stock broker.
Why do you need to provide margin?
The broker or company has to get the amount paid to the exchange. The moment one’s bill is generated he may not be able to pay the immediately. In this case the broker has to pay from his pocket. He cannot allow every client to make payment later and hence to get credit and trading one needs to pay certain amount from various clients which is known as a margin amount. On the basis of margin the broker offers credit to the client.
Let us see in a simple way how to use this margin calculator for your everyday trades. The simple thing you need to do in order to know the margin requirements for the currency segment is to visit the official portal of your stock broker. They will update the margin requirements in a detailed manner that will be divided into multiple slots. The margin segment implies the full margin you need to pay when you want to carry the position for the next day. However, the MIS and other segments are meant for the intraday trades and the margin charged for this segment will be much lesser than the full margin required for carrying your position overnight.
In this way, using the margin calculator will give you a complete idea about how much money you need for executing the currency future deals in the market. You need to remember that volatility in the market may change the margin requirements suddenly and you have to check the official portal of your service provider everytime you want to execute the deal.