Forex margin trading is a way of applying leverage to increase the purchasing power of your money. Leverage simply means using a small sum to control a much larger sum. This is possible because it is unlikely that the value of a currency will change by more than a certain percentage over a short time. So you can place a few hundred dollars in your brokerage account to trade on the margin - the amount that you think the price will fall. Your broker will in effect lend you the balance.

Trading on margins is also known in stock and futures trading, but because of the special nature of currencies, you can get a lot more leverage in the forex market. Depending on your broker’s terms, you may be able to control 50, 100 or even 200 times your account balance.

This can lead to big profits if you are successful, but it can also mean big losses if not. In general, the more leverage you use, the more risky your trading is.

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