In the futures market, margin has a definition distinct from its definition in the stock market, where margin is the use of borrowed money to purchase securities. In the futures market, margin refers to the initial deposit of " good faith " made into an account in order to enter into a futures contract. This margin is referred to as good faith because it is this money that is used to debit any day-to-day losses.

When you open a futures contract, the futures exchange will state a minimum amount of money that you must deposit into your account. This original deposit of money is called the initial margin. When your contract is liquidatedyou will be refunded the initial margin plus or minus any gains or losses that occur over the span of the futures contract.

Margin Requirements | AGN Futures

In other words, the amount in your margin account changes daily as the market fluctuates in relation to your futures contract. These predetermined initial margin amounts are continuously under review: The initial margin is the minimum amount required to enter into a new futures contract, but the maintenance margin is the lowest amount an account can reach before needing to be replenished. For example, if your margin account drops to a certain level because of a series of daily losses, brokers are required to make a margin call and request that you make an additional deposit into your account to bring the margin back up to the initial amount.

Word to the wise: If they are not, the brokerage can have the right to liquidate your position completely in order to make up for any losses it may have incurred on your behalf. The Double-Edged Sword In the futures market, leverage refers to having control over large cash amounts of commodities with comparatively small levels of capital.

In other words, with a relatively small amount of cash, you can enter into a futures contract that is worth much more than you initially have to pay deposit into your margin account. It is said that in the futures market, more than any other form of investment, price changes are highly leveraged, meaning a small change in a futures price can translate into a huge gain or loss.

Futures positions are highly leveraged because the initial margins that are set by the exchanges are relatively small compared to the cash value of the contracts in question which is part of the reason why the futures market is useful but also very risky. The smaller the margin in relation to the cash value of the futures contract, the higher the leverage. You already know that the futures market can be extremely stephen cooper stock options and,therefore, not for the faint of heart.

This should become more obvious once you understand the arithmetic of leverage. Highly leveraged investments can produce two results: As a result of leverage, if the futures trading margin requirements of the futures contract moves up even slightly, the profit gain will be large in comparison to the initial margin.

However, if the price just inches downwards, that same high leverage penny trading strategies yield huge losses in how to get money in avabel online to the initial margin deposit. Consequently, while the value of a commodity or a financial instrument may not exhibit very much price volatility, the same percentage gains and losses are much more dramatic in futures contracts due to low margins and high leverage.

Futures Trading Margin Requirements - Dogpile Web Search

Pricing and Limits As we mentioned before, contracts in the futures market are a result of competitive price discovery. Prices are quoted as they would be in the cash market: Prices on futures contracts, however, have a minimum amount that they can move. These minimums are established by the futures exchanges and are known as " ticks. For futures investors, it's important to understand how the manual velas japonesas forex price movement for each commodity will affect the size of the contract in question.

Futures hotforex bonus removal also have a price change limit that determines the prices between which the contracts can trade on a daily basis.

The price change limit is added to and subtracted from the previous day's close and the results remain the upper and lower price boundary for the day. If at any moment during the day the price of futures contracts for futures trading margin requirements reaches either boundary, the exchange shuts down all trading of silver ib forex fees for the day.

Because trading shuts down if prices reach their daily limits, there may be occasions when it is NOT possible to liquidate an existing futures position at will. The exchange can revise this price limit if it feels it's necessary.

It's not uncommon for the exchange to abolish daily price limits in the month that the contract expires delivery or " spot " month. This is because trading is often volatile during this month, as sellers and high probability forex trades try to obtain the best price possible before the expiration of the contract.

In order to avoid any unfair advantages, the CTFC and the futures exchanges impose limits on the total amount of contracts or units of a commodity in which any single person can invest. These are known as position limits and they ensure that no one person can control the market price for a particular commodity.

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A Brief History Futures Fundamentals: How The Market Works Futures Fundamentals: The Players Futures Fundamentals: How To Trade Futures Fundamentals: Futures is short for Futures Contracts, which are contracts between a buyer and seller of an asset who agree to exchange goods and money at a future date, but at a price and quantity determined Margin loans, futures and ETF options can all mean better returns, but which one should you pick?

We explain what forex futures are, where they are traded, and the tools you need to successfully trade these derivatives. When an investor buys on margin, he or she pays a portion of the stock price — called the margin -- and borrows the rest from a stockbroker.

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