Margin

GBP/USD = 1.7464;

USD/JPY = 112.29;

Therefore: GBP/JPY = 112.29 x 1.7464 = 196.10.

Margin

Banks and/or online trading providers need collateral to ensure that the investor can pay in the event of a loss. The collateral is called the “margin” and is also known as minimum security in Forex markets. In practice, it is a deposit to the trader's account that is intended to cover any currency trading losses in the future.

Margin enables private investors to trade in markets that have high minimum units of trading, by allowing traders to hold a much larger position than their account value. Margin trading also enhances the rate of profit, but similarly enhances the rate of loss, beyond that taken without leveraging.

Maintenance Margin

Most trading platforms require a “maintenance margin” be deposited by the trader parallel to the margins deposited for actual trades. The main reason for this is to ensure the necessary amount is available in the event of a “gap” or “slippage” in rates. Maintenance margins are also used to cover administrative costs.

When a trader sets a Stop-Loss rate, most market makers cannot guarantee that the stop-loss will actually be used. For example, if the market for a particular counter currency had a vertical fall from 1.1850 to 1.1900 between the close and opening of the market, and the trader had a stop-loss of 1.1875, at which rate would the deal be closed? No matter how the rate slippage is accounted for, the trader would probably be required to add-up on his initial margin to finalize the automatically closed transaction. The funds from the maintenance margin might be used for this purpose.

Important note: Easy-Forex™ does NOT require that traders deposit a maintenance margin. Easy-Forex™ guarantees the exact rate (Stop-Loss or other) as pre-defined by the trader.