These style names have nothing to do with geography; instead referring to the methodology in which the swaption will be executed. Key Takeaways Bermudan swaption: the purchaser is allowed to exercise the option and enter into the specified swap on a predetermined set of specific dates.
European swaption: the purchaser is only allowed to exercise the option and enter into the swap on the expiration date of the swaption. American swaption: the purchaser can exercise the option and enter into the swap on any day between the origination of the swap and the expiration date. There may be a short lockout period after origination. Swaptions are generally used to hedge options positions on bonds, to aid in restructuring current positions, to alter a portfolio or to adjust a party's aggregate payoff profile.
Large corporations also participate in the swaption market to help manage interest rate risk. Swap contracts are offered in most of the major world currencies, including the U. Commercial banks are generally the main market makers because the immense technological and human capital required to monitor and maintain a portfolio of swaptions is usually out of the reach of smaller-sized firms. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
However, it introduces increased loss potential if the underlying asset moves too far in the wrong direction. Put another way, a seagull option is a one-direction protective technique whereby either downward or upward movements can be reined in, but not both. While the seagull strategy typically involves bull call spreads and bear put spreads, they can also involve the opposite using bear call spreads and bull put spreads.
Key Takeaways A seagull option is a three-legged currency options trading strategy to minimize risk. It is implemented using two puts and a call or vice versa. If there is no significant movement on the exchange rate, then returns might be modest using this trading strategy. Basics of Seagull Option The options contracts must be in equal amounts and are normally priced to produce a zero premium. This structure is appropriate when volatility is high, but expected to fall, and the price is expected to trade with a lack of certainty on direction.
This is also known as a "long seagull. How to Construct a Seagull Option Here is an example where volatility is relatively high and the trader expects the price of the underlying asset to rise while volatility falls. In this example, the euro is trading at 1. First, buy the bullish call spread with a purchase of the 1.
Both for the same underlying asset and expiration date. Next, sell the 1.
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This means that when the U. As such, the forex market can be extremely active anytime, with price quotes changing constantly. These terms are synonymous and all refer to the forex market. A Brief History of Forex In its most basic sense, the forex market has been around for centuries. People have always exchanged or bartered goods and currencies to purchase goods and services.
However, the forex market, as we understand it today, is a relatively modern invention. After the Bretton Woods accord began to collapse in , more currencies were allowed to float freely against one another. The values of individual currencies vary based on demand and circulation and are monitored by foreign exchange trading services. Commercial and investment banks conduct most of the trading in forex markets on behalf of their clients, but there are also speculative opportunities for trading one currency against another for professional and individual investors.
There are two distinct features of currencies as an asset class : You can earn the interest rate differential between two currencies. You can profit from changes in the exchange rate. An investor can profit from the difference between two interest rates in two different economies by buying the currency with the higher interest rate and shorting the currency with the lower interest rate.
Prior to the financial crisis, it was very common to short the Japanese yen JPY and buy British pounds GBP because the interest rate differential was very large. This strategy is sometimes referred to as a carry trade.
Currency trading was very difficult for individual investors prior to the Internet. Most currency traders were large multinational corporations , hedge funds , or high-net-worth individuals HNWIs because forex trading required a lot of capital.
With help from the Internet, a retail market aimed at individual traders has emerged, providing easy access to the foreign exchange markets through either the banks themselves or brokers making a secondary market. Most online brokers or dealers offer very high leverage to individual traders who can control a large trade with a small account balance. It is the only truly continuous and nonstop trading market in the world. In the past, the forex market was dominated by institutional firms and large banks, which acted on behalf of clients.
But it has become more retail-oriented in recent years, and traders and investors of many holding sizes have begun participating in it. An interesting aspect of world forex markets is that there are no physical buildings that function as trading venues for the markets. Instead, it is a series of connections made through trading terminals and computer networks. Participants in this market are institutions, investment banks, commercial banks, and retail investors. The foreign exchange market is considered more opaque than other financial markets.
Currencies are traded in OTC markets, where disclosures are not mandatory. Large liquidity pools from institutional firms are a prevalent feature of the market. A survey found that the motives of large financial institutions played the most important role in determining currency prices. Forex is traded primarily via three venues: spot markets, forwards markets, and futures markets. When people refer to the forex market, they are thus usually referring to the spot market.
The forwards and futures markets tend to be more popular with companies or financial firms that need to hedge their foreign exchange risks out to a specific date in the future. Spot Market Forex trading in the spot market has always been the largest because it trades in the biggest underlying real asset for the forwards and futures markets. Previously, volumes in the forwards and futures markets surpassed those of the spot markets. However, the trading volumes for forex spot markets received a boost with the advent of electronic trading and the proliferation of forex brokers.
The spot market is where currencies are bought and sold based on their trading price. That price is determined by supply and demand and is calculated based on several factors, including current interest rates, economic performance, sentiment toward ongoing political situations both locally and internationally , and the perception of the future performance of one currency against another.
A finalized deal is known as a spot deal. It is a bilateral transaction in which one party delivers an agreed-upon currency amount to the counterparty and receives a specified amount of another currency at the agreed-upon exchange rate value.
After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present rather than in the future , these trades actually take two days for settlement. Forwards and Futures Markets A forward contract is a private agreement between two parties to buy a currency at a future date and at a predetermined price in the OTC markets.
A futures contract is a standardized agreement between two parties to take delivery of a currency at a future date and at a predetermined price. Futures trade on exchanges and not OTC. In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves. In the futures market, futures contracts are bought and sold based upon a standard size and settlement date on public commodities markets, such as the Chicago Mercantile Exchange CME.
Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized. The exchange acts as a counterparty to the trader, providing clearance and settlement services.
Both types of contracts are binding and are typically settled for cash at the exchange in question upon expiry, although contracts can also be bought and sold before they expire. The currency forwards and futures markets can offer protection against risk when trading currencies. Usually, big international corporations use these markets to hedge against future exchange rate fluctuations, but speculators take part in these markets as well. In addition to forwards and futures, options contracts are also traded on certain currency pairs.
Forex options give holders the right, but not the obligation, to enter into a forex trade at a future date and for a pre-set exchange rate, before the option expires. Unlike the spot market, the forwards, futures, and options markets do not trade actual currencies.
Instead, they deal in contracts that represent claims to a certain currency type, a specific price per unit, and a future date for settlement. This is why they are known as derivatives markets. Uses of the Forex Markets Forex for Hedging Companies doing business in foreign countries are at risk due to fluctuations in currency values when they buy or sell goods and services outside of their domestic market.
Foreign exchange markets provide a way to hedge currency risk by fixing a rate at which the transaction will be completed. To accomplish this, a trader can buy or sell currencies in the forward or swap markets in advance, which locks in an exchange rate. For example, imagine that a company plans to sell U.
Unfortunately, the U. A stronger dollar resulted in a much smaller profit than expected. The blender company could have reduced this risk by short selling the euro and buying the U. That way, if the U. If the U. Hedging of this kind can be done in the currency futures market. The advantage for the trader is that futures contracts are standardized and cleared by a central authority. However, currency futures may be less liquid than the forwards markets, which are decentralized and exist within the interbank system throughout the world.
Forex for Speculation Factors like interest rates , trade flows, tourism, economic strength, and geopolitical risk affect the supply and demand for currencies, creating daily volatility in the forex markets. A forecast that one currency will weaken is essentially the same as assuming that the other currency in the pair will strengthen because currencies are traded as pairs.
The trader believes higher U. How to Start Trading Forex Trading forex is similar to equity trading. Here are some steps to get yourself started on the forex trading journey. Learn about forex: While it is not complicated, forex trading is a project of its own and requires specialized knowledge.
For example, the leverage ratio for forex trades is higher than for equities, and the drivers for currency price movement are different from those for equity markets. There are several online courses available for beginners that teach the ins and outs of forex trading.
Set up a brokerage account: You will need a forex trading account at a brokerage to get started with forex trading. Forex brokers do not charge commissions. Instead, they make money through spreads also known as pips between the buying and selling prices.
For beginner traders, it is a good idea to set up a micro forex trading account with low capital requirements. Such accounts have variable trading limits and allow brokers to limit their trades to amounts as low as 1, units of a currency.
For context, a standard account lot is equal to , currency units. A micro forex account will help you become more comfortable with forex trading and determine your trading style. Develop a trading strategy: While it is not always possible to predict and time market movement, having a trading strategy will help you set broad guidelines and a road map for trading.
A good trading strategy is based on the reality of your situation and finances. It takes into account the amount of cash that you are willing to put up for trading and, correspondingly, the amount of risk that you can tolerate without getting burned out of your position. Remember, forex trading is mostly a high-leverage environment.
But it also offers more rewards to those who are willing to take the risk. Always be on top of your numbers: Once you begin trading, always check your positions at the end of the day. Most trading software already provides a daily accounting of trades.
Make sure that you do not have any pending positions to be filled out and that you have sufficient cash in your account to make future trades. Cultivate emotional equilibrium: Beginner forex trading is fraught with emotional roller coasters and unanswered questions. Should you have held onto your position a bit longer for more profits? How did you miss that report about low gross domestic product GDP numbers that led to a decline in overall value of your portfolio?
Obsessing over such unanswered questions can lead you down a path of confusion. That is why it is important to not get carried away by your trading positions and cultivate emotional equilibrium across profits and losses.
Be disciplined about closing out your positions when necessary. Forex Terminology The best way to get started on the forex journey is to learn its language. Here are a few terms to get you started: Forex account: A forex account is used to make currency trades.
Remember that the trading limit for each lot includes margin money used for leverage. This means that the broker can provide you with capital in a predetermined ratio. Ask: An ask or offer is the lowest price at which you are willing to buy a currency. The ask price is generally greater than the bid price. Bid: A bid is the price at which you are willing to sell a currency. A market maker in a given currency is responsible for continuously putting out bids in response to buyer queries.
While they are generally lower than ask prices, in instances when demand is great, bid prices can be higher than ask prices. Bear market: A bear market is one in which prices decline among currencies. Bear markets signify a market downtrend and are the result of depressing economic fundamentals or catastrophic events, such as a financial crisis or a natural disaster.
Bull market: A bull market is one in which prices increase for all currencies. Bull markets signify a market uptrend and are the result of optimistic news about the global economy. Contract for difference: A contract for difference CFD is a derivative that enables traders to speculate on price movements for currencies without actually owning the underlying asset.
A trader betting that the price of a currency pair will increase will buy CFDs for that pair, while those who believe its price will decline will sell CFDs relating to that currency pair. The use of leverage in forex trading means that a CFD trade gone awry can lead to heavy losses.
Leverage: Leverage is the use of borrowed capital to multiply returns. The forex market is characterized by high leverages, and traders often use these leverages to boost their positions. Since they have used very little of their own capital, the trader stands to make significant profits if the trade goes in the correct direction. The flipside to a high-leverage environment is that downside risks are enhanced and can result in significant losses.
Lot size: Currencies are traded in standard sizes known as lots. There are four common lot sizes: standard , mini , micro , and nano. Standard lot sizes consist of , units of the currency. Mini lot sizes consist of 10, units, and micro lot sizes consist of 1, units of the currency. Some brokers also offer nano lot sizes of currencies, worth units of the currency, to traders. The bigger the lot size, the higher the profits or losses , and vice versa.
Brokers will also provide technical and fundamental information, economic calendars, and other extensive research. Leverage Your Bets Leverage is necessary in forex because the price deviations the sources of profit are merely fractions of a cent. Leverage, expressed as a ratio between total capital available to actual capital, is the amount of money a broker will lend you for trading.
Many brokerages offer a ratio of So give leverage some thought. Bear in mind that while less leverage means lower risk of a margin call , it also means less bang for your buck. If you have limited capital, consider a brokerage that offers high leverage through a margin account. If you have plenty of capital, any broker with a wide variety of leverage options should do.
A variety of options lets you vary the amount of risk you are willing to take. For example, less leverage and therefore less risk may be preferable for highly volatile exotic currency pairs. The smallest account is known as a mini account. Premium accounts, which often require significantly higher amounts of capital, let you use different amounts of leverage and often offer additional tools and services.
Forex Broker Actions to Avoid Sniping and Hunting Sniping and hunting are the premature buying or selling of currency near preset points. They are inappropriate activities used to increase profits. The only way to determine the brokers that do this is to talk to fellow traders. There is no blacklist or organization that reports such activity. Suspect Margin Rules When you are trading with borrowed money, your forex broker has a say in how much risk you take.
As such, your broker can buy or sell at their discretion, which can affect you negatively. Let's say you have a margin account , and your position suffers a sudden drop before rebounding to all-time highs. Even if you have enough cash to cover the change in value, some brokers will liquidate your position on a margin call at the low.
Their action can cost you a significant amount of capital. Be sure to conduct thorough due diligence prior to selecting a broker. Once you've made your selection, signing up for a forex account is similar to getting an equity account. The only major difference is that for forex accounts, you are required to sign a margin agreement.
This agreement states that you will be trading with borrowed money and, as such, the brokerage has the right to intervene in your trades to protect its interests. That said, once you sign up and fund your account, you'll be ready to trade. Define Your Method of Analysis Technical analysis and fundamental analysis are two methods used by forex traders to help them determine when to enter and exit the forex market.
Technical analysis is by far the more commonly used.
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Such accounts have variable trading limits and allow brokers to limit their trades to amounts as low as 1, units of a currency. For context, a standard account lot is equal to , currency units. A micro forex account will help you become more comfortable with forex trading and determine your trading style. Develop a trading strategy: While it is not always possible to predict and time market movement, having a trading strategy will help you set broad guidelines and a road map for trading.
A good trading strategy is based on the reality of your situation and finances. It takes into account the amount of cash that you are willing to put up for trading and, correspondingly, the amount of risk that you can tolerate without getting burned out of your position.
Remember, forex trading is mostly a high-leverage environment. But it also offers more rewards to those who are willing to take the risk. Always be on top of your numbers: Once you begin trading, always check your positions at the end of the day. Most trading software already provides a daily accounting of trades. Make sure that you do not have any pending positions to be filled out and that you have sufficient cash in your account to make future trades.
Cultivate emotional equilibrium: Beginner forex trading is fraught with emotional roller coasters and unanswered questions. Should you have held onto your position a bit longer for more profits? How did you miss that report about low gross domestic product GDP numbers that led to a decline in overall value of your portfolio? Obsessing over such unanswered questions can lead you down a path of confusion.
That is why it is important to not get carried away by your trading positions and cultivate emotional equilibrium across profits and losses. Be disciplined about closing out your positions when necessary. Forex Terminology The best way to get started on the forex journey is to learn its language.
Here are a few terms to get you started: Forex account: A forex account is used to make currency trades. Remember that the trading limit for each lot includes margin money used for leverage. This means that the broker can provide you with capital in a predetermined ratio. Ask: An ask or offer is the lowest price at which you are willing to buy a currency. The ask price is generally greater than the bid price.
Bid: A bid is the price at which you are willing to sell a currency. A market maker in a given currency is responsible for continuously putting out bids in response to buyer queries. While they are generally lower than ask prices, in instances when demand is great, bid prices can be higher than ask prices. Bear market: A bear market is one in which prices decline among currencies.
Bear markets signify a market downtrend and are the result of depressing economic fundamentals or catastrophic events, such as a financial crisis or a natural disaster. Bull market: A bull market is one in which prices increase for all currencies. Bull markets signify a market uptrend and are the result of optimistic news about the global economy.
Contract for difference: A contract for difference CFD is a derivative that enables traders to speculate on price movements for currencies without actually owning the underlying asset. A trader betting that the price of a currency pair will increase will buy CFDs for that pair, while those who believe its price will decline will sell CFDs relating to that currency pair. The use of leverage in forex trading means that a CFD trade gone awry can lead to heavy losses.
Leverage: Leverage is the use of borrowed capital to multiply returns. The forex market is characterized by high leverages, and traders often use these leverages to boost their positions. Since they have used very little of their own capital, the trader stands to make significant profits if the trade goes in the correct direction.
The flipside to a high-leverage environment is that downside risks are enhanced and can result in significant losses. Lot size: Currencies are traded in standard sizes known as lots. There are four common lot sizes: standard , mini , micro , and nano.
Standard lot sizes consist of , units of the currency. Mini lot sizes consist of 10, units, and micro lot sizes consist of 1, units of the currency. Some brokers also offer nano lot sizes of currencies, worth units of the currency, to traders. The bigger the lot size, the higher the profits or losses , and vice versa.
Margin: Margin is the money set aside in an account for a currency trade. Margin money helps assure the broker that the trader will remain solvent and be able to meet monetary obligations, even if the trade does not go their way. The amount of margin depends on the trader and customer balance over a period of time. Margin is used in tandem with leverage defined above for trades in forex markets.
One pip is equal to 0. The pip value can change depending on the standard lot size offered by a broker. Because currency markets use significant leverage for trades, small price moves—defined in pips—can have an outsized effect on the trade. Spread: A spread is the difference between the bid sell price and ask buy price for a currency. Forex traders do not charge commissions; they make money through spreads. The size of the spread is influenced by many factors. Some of them are the size of your trade, demand for the currency, and its volatility.
Sniping and hunting: Sniping and hunting is the purchase and sale of currencies near predetermined points to maximize profits. Brokers indulge in this practice, and the only way to catch them is to network with fellow traders and observe for patterns of such activity.
Basic Forex Trading Strategies The most basic forms of forex trades are a long trade and a short trade. In a long trade, the trader is betting that the currency price will increase in the future and they can profit from it. Traders can also use trading strategies based on technical analysis, such as breakout and moving average , to fine-tune their approach to trading. Depending on the duration and numbers for trading, trading strategies can be categorized into four further types: A scalp trade consists of positions held for seconds or minutes at most, and the profit amounts are restricted in terms of the number of pips.
Such trades are supposed to be cumulative, meaning that small profits made in each individual trade add up to a tidy amount at the end of a day or time period. They rely on the predictability of price swings and cannot handle much volatility. Therefore, traders tend to restrict such trades to the most liquid pairs and at the busiest times of trading during the day. Day trades are short-term trades in which positions are held and liquidated in the same day.
The duration of a day trade can be hours or minutes. Day traders require technical analysis skills and knowledge of important technical indicators to maximize their profit gains. Just like scalp trades, day trades rely on incremental gains throughout the day for trading. In a swing trade , the trader holds the position for a period longer than a day; i.
Swing trades can be useful during major announcements by governments or times of economic tumult. Since they have a longer time horizon, swing trades do not require constant monitoring of the markets throughout the day. In addition to technical analysis, swing traders should be able to gauge economic and political developments and their impact on currency movement. In a position trade , the trader holds the currency for a long period of time, lasting for as long as months or even years.
This type of trade requires more fundamental analysis skills because it provides a reasoned basis for the trade. Charts Used in Forex Trading Three types of charts are used in forex trading. They are: Line Charts Line charts are used to identify big-picture trends for a currency. They are the most basic and common type of chart used by forex traders. They display the closing trading price for the currency for the time periods specified by the user.
The trend lines identified in a line chart can be used to devise trading strategies. For example, you can use the information contained in a trend line to identify breakouts or a change in trend for rising or declining prices. While it can be useful, a line chart is generally used as a starting point for further trading analysis. Bar Charts Much like other instances in which they are used, bar charts are used to represent specific time periods for trading.
They provide more price information than line charts. Each bar chart represents one day of trading and contains the opening price, highest price, lowest price, and closing price OHLC for a trade. Colors are sometimes used to indicate price movement, with green or white used for periods of rising prices and red or black for a period during which prices declined. Candlestick Charts Candlestick charts were first used by Japanese rice traders in the 18th century.
They are visually more appealing and easier to read than the chart types described above. The upper portion of a candle is used for the opening price and highest price point used by a currency, and the lower portion of a candle is used to indicate the closing price and lowest price point.
A down candle represents a period of declining prices and is shaded red or black, while an up candle is a period of increasing prices and is shaded green or white. The formations and shapes in candlestick charts are used to identify market direction and movement. Some of the more common formations for candlestick charts are hanging man and shooting star.
Pros and Cons of Trading Forex Pros and Cons of Trading Forex Pros Forex markets are the largest in terms of daily trading volume in the world and therefore offer the most liquidity. This makes it easy to enter and exit a position in any of the major currencies within a fraction of a second for a small spread in most market conditions.
The forex market is traded 24 hours a day, five and a half days a week—starting each day in Australia and ending in New York. The broad time horizon and coverage offer traders several opportunities to make profits or cover losses. The extensive use of leverage in forex trading means that you can start with little capital and multiply your profits.
Automation of forex markets lends itself well to rapid execution of trading strategies. Forex trading generally follows the same rules as regular trading and requires much less initial capital; therefore, it is easier to start trading forex compared to stocks. The forex market is more decentralized than traditional stock or bond markets. There is no centralized exchange that dominates currency trade operations, and the potential for manipulation—through insider information about a company or stock—is lower.
Cons Even though they are the most liquid markets in the world, forex trades are much more volatile than regular markets. Extreme amounts of leverage have led to many dealers becoming insolvent unexpectedly. Banks, brokers, and dealers in the forex markets allow a high amount of leverage, which means that traders can control large positions with relatively little money of their own.
Leverage in the range of is not uncommon in forex. A trader must understand the use of leverage and the risks that leverage introduces in an account. Trading currencies productively requires an understanding of economic fundamentals and indicators.
A currency trader needs to have a big-picture understanding of the economies of the various countries and their interconnectedness to grasp the fundamentals that drive currency values. The decentralized nature of forex markets means that it is less accountable to regulation than other financial markets. The extent and nature of regulation in forex markets depend on the jurisdiction of trading.
Forex markets lack instruments that provide regular income, such as regular dividend payments, which might make them attractive to investors who are not interested in exponential returns. Why Do People Trade Currencies? Companies and traders use forex for two main reasons: speculation and hedging. The former is used by traders to make money off the rise and fall of currency prices, while the latter is used to lock in prices for manufacturing and sales in overseas markets.
Are Forex Markets Volatile? Forex markets are among the most liquid markets in the world. Hence, they tend to be less volatile than other markets, such as real estate. The volatility of a particular currency is a function of multiple factors, such as the politics and economics of its country.
Therefore, events like economic instability in the form of a payment default or imbalance in trading relationships with another currency can result in significant volatility. Are Forex Markets Regulated? Forex trade regulation depends on the jurisdiction. Countries like the United States have sophisticated infrastructure and markets to conduct forex trades.
However, due to the heavy use of leverage in forex trades, developing countries like India and China have restrictions on the firms and capital to be used in forex trading. Europe is the largest market for forex trades. When comparing forex brokers, you may find a large range of spreads.
Choose a Broker Who's Backed by Regulatory Agencies and a Reliable Institution Unlike equity brokers, forex brokers are usually tied to large banks or lending institutions because of the large amounts of capital required leverage that they need to provide. You can check on this and other financial information and statistics at a forex brokerage website, the website of its parent company , or through BrokerCheck at the Financial Industry Regulatory Authority FINRA website.
Get the Tools You Need to Succeed Forex brokers offer different trading platforms for use by their clients—just like brokers in other markets. These trading platforms usually feature real-time charts, technical analysis tools, real-time news and data, and even support for trading systems. As part of your broker selection process, be sure to request free trials to test the different trading platforms. Brokers will also provide technical and fundamental information, economic calendars, and other extensive research.
Leverage Your Bets Leverage is necessary in forex because the price deviations the sources of profit are merely fractions of a cent. Leverage, expressed as a ratio between total capital available to actual capital, is the amount of money a broker will lend you for trading. Many brokerages offer a ratio of So give leverage some thought. Bear in mind that while less leverage means lower risk of a margin call , it also means less bang for your buck. If you have limited capital, consider a brokerage that offers high leverage through a margin account.
If you have plenty of capital, any broker with a wide variety of leverage options should do. A variety of options lets you vary the amount of risk you are willing to take. For example, less leverage and therefore less risk may be preferable for highly volatile exotic currency pairs. The smallest account is known as a mini account. Premium accounts, which often require significantly higher amounts of capital, let you use different amounts of leverage and often offer additional tools and services.
Forex Broker Actions to Avoid Sniping and Hunting Sniping and hunting are the premature buying or selling of currency near preset points. They are inappropriate activities used to increase profits. The only way to determine the brokers that do this is to talk to fellow traders. There is no blacklist or organization that reports such activity.
Suspect Margin Rules When you are trading with borrowed money, your forex broker has a say in how much risk you take. As such, your broker can buy or sell at their discretion, which can affect you negatively. Let's say you have a margin account , and your position suffers a sudden drop before rebounding to all-time highs.
Even if you have enough cash to cover the change in value, some brokers will liquidate your position on a margin call at the low. Their action can cost you a significant amount of capital. Be sure to conduct thorough due diligence prior to selecting a broker.
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