In the past couple of years, many individuals from all over the world have become very interested in doing online business. According to numerous profitable options in the virtual world, it’s no wonder why interest in online companies has grown immensely.
Perhaps one of the most profitable and popular online jobs at the moment is Forex trading. For those who are at the beginning of their trading career, it’s important to note that Forex trading refers to the act of exchanging one particular currency for another.
Forex is the acronym of foreign exchange, while its market is considered one of the most lucrative and most significant financial markets on the planet. Each day trillions of transactions take place on the Forex market, which runs 24 hours a day, 5.5 days a week.
To understand Forex trading the best, let’s see the role of a Forex broker and what exactly is a CFD calculator.
What is a Forex broker and CFD Margin?
Now that you are aware of the Forex fundamentals, it’s essential to understand the prominent role of the Forex broker and CFD Margin. A Forex broker represents the financial service that provides traders access to a platform for trading currencies.
There are two types of brokers. The first type is responsible for classic trading (the exchange-traded funds), while the other type is known as the “market makers.” We will focus on the second type of broker.
Contract for Difference, or CFD Margin, represents the amount of money one Forex trader needs to enter a CFD trade. The CFD Calculator is a crucial tool that calculates the required CFD margin.
Since a CFD Margin is the minimum deposit necessary for accessing a brokers’ funds, this particular calculator will make your life easier and help you calculate that minimum deposit.
How can you use the CFD calculator?
To calculate the minimum deposit required, it’s necessary to understand the whole step-by-step process that goes like this:
- Type in the number of shares or the contract size you are trading for
- Enter the market price per one single share
- Pick the leverage that your Forex broker provided you
- Fill in force, margin rate, and rates that the Forex broker provides
- Hit the button “Calculate” to receive the required CFD margin.
Understand the CDF Margin formula is the key
A Forex trader should understand how the CDF Margin formula looks and works since leveraged products are complex and may cause money losses while trading. Therefore, each trader should note this formula:
- (( Contract Size * Market Price) / User Leverage) * Required Margin Rate = CFD margin
In this case, we have:
- Contract Size: represents the number of shares that one is willing to trade;
- Market Price: refers to the present price per share on the market;
- User leverage: it is the leverage provided by the broker to the trader;
- Required Margin Rate: stands for the percentage margin requirements needed to open a trading position.
The Bottom Line
Don’t forget that Contracts for Differences are very complex instruments. Every trader must keep in mind the basic calculations that are required to save his own money. In conclusion, experience and market expertise are two crucial factors that will make one trader successful in the long run.